Trust Administration

Question 1

Trustee’s Fiduciary Duties - Generally

Answer 1

1. Duty of Loyalty
2. Duty of Competence
3. Reasonable Discretion
4. Full Disclosure

Question 2

Duty of Loyalty

Answer 2

1. No Self Dealing – presumption of unfairness if Trustee benefits
2. No Conflicts
3. Impartiality – take into account interests of all Bs (see TTC 117.007 & 8)

Question 3

Duty of Competence (Care) -

1. General Rule
2. Delegation?
3. Comingling Funds
4. Enforcement of Claims & Preservation of Property
5. Duties at Inception of Trust
6. Investing

Answer 3

1. General Rule Administer Trust in good faith according to Trust’s terms (see TTC 113.051) utilizing reasonable care, skill & prudence which an ordinary, capable & careful person would use in own affairs
2. No Delegation – Can’t delegate fundamental trustee decisions
   
   1. Exceptions – lacks expertise – attorneys, accountants, investment agents, etc (see TTC 117.001 & 113.018)
3. Duty not to co-mingle funds – separate Trust property
4. Duty to enforce claims, defend & preserve Trust property
5. Duties @ inception of trust – take and control trust property, review trust assets – bring assets into compliance w/ purpose, terms, and distribution requirements (see TTC 117.006).
6. Investing – Prudent Investor Rule

Question 4

Duty of Reasonable Discretion -

1. General Rule
2. T is also B?

Answer 4

1. Trustees must exercise discretionary power in good faith (reasonably), in accordance with the trust terms, and in the interest of the Bs.
2. If Trustee is also B, cannot exceed ascertainable standard (HEMS)

Question 5

Duty of Full Disclosure -

1. General Rule
2. Existence of Trust
3. Records
4. Inspenction
5. Accountings

Answer 5

1. General Rule - Affirmative duty to fully & accurately disclose all material facts necessary for B’s to protect their interest
2. Existence of Trust - Duty to let B’s know of existence of Irrev Trust if B is 25+yrs old
3. Records - Duty to keep full and accurate records
4. Inspection - Must allow B’s to inspect books and records (see Shannon v Frost Bank, 533 SW2nd 389 (1975))
5. Accountings – B’s may request – Trustee has 90 days to provide (see TTC 113.151)

Question 6

Acceptance as Trustee -

1. General Rule
2. Capacity
3. Presumption
   
   1. Exceptions
4. Conclusive Acceptance

Answer 6

1. General Rule - A person must make a conscious decision to accept the office of trustee. No duties are imposed and no liability attaches until a trustee accepts the position.
2. Capacity - Must have legal capacity to take, hold, and transfer property.
   
   1. If corporation, must have power to act in trust state.
3. Presumption- if potential trustee exercises trustee powers, then presumed to have accepted trusteeship.
   
   1. Exceptions -
      
      1. acting to preserve trust peroperty and give snotice of rejection to settlor or bene if settlor is dead; or
      2. inspecting or investigating trust peroperty.
4. Conclusive Acceptance - The signature of person named as trustee on the trust document or on a separate written acceptance is conclusive evidence that person accepted trusteeship. (see TTC 112.009(a))

Question 7

Trustee Acceptance - Bond

1. General Rule
2. Exceptions
3. Registration

Answer 7

1. General Rule - Unless the trust document says otherwise, the trustee must post bond. (see TTC 113.058)
   
   1. Exceptions:
      
      1. Settlor waives; or
      2. Corporate Trustees don’t have to post bond (unless document requires corp trustee to do so).
   2. No Registration Requirement – No requirement in Texas to register trust with courts
      
      1. some charitable trust may have to register with AG.

Question 8

Trustee Duty to Take Possession of Trust Property

Answer 8

1. “Within a reasonable time after accepting a trusteeship or receiving trust assets, a trustee shall review the trust assets and make and implement decisions concerning the retention and disposition of assets, in order to bring the trust portfolio into compliance with the purposes, terms, distribution requirements, and other circumstances of the trust, and with the requirements of [the uniform prudent investor act]….” TTC 117.006

Question 9

Trustee Best Practices After Acceptance

Answer 9

1. The trustee “shall exercise reasonable care, skill, and caution” in managing trust assets. (see TTC 117.004(a)).
   
   1. Locate property;
   2. Assume control;
   3. Record deeds / register stock;
   4. Buy insurance;
   5. Repair property;
   6. Safeguard property (safe deposit box).
   7. Locate Beneficiaries

Question 10

Earmarking Rules

Answer 10

1. Trustee must earmark trust property
   
   1. Label the property belonging to the trust;
      
      1. John Doe, Trustee of the XYZ trust.
   2. Prevents property from being confused with trustee’s own property by trustee’s creditors, heirs, and other claimants.

Question 11

Commingling Rules -

1. Generally
2. What about securities of trustee owned by trust?
3. Corporate Trustee Exemptions

Answer 11

1. Avoid Comingling – must keep trust property separate from trustee’s own property
2. No purchasing stocks, bonds, or other securities of a corporation that is a trustee or of which trustee is an employee or owner.
   
   1. Need to liquidate any conflicting assets upon receipt of trust corpus
3. Corporate Trustees –
   
   1. May establish common trust funds for investments
   2. If settlor authorizes trustee can permanently deposit trust funds with itself
      
      1. Otherwise can only deposit with itself temporarily

Question 12

Corporate Trustee Hiring Affiliates or Subdivisions

Answer 12

1. TTC 113.053(f) - A corporate trustee has the limited ability to hire their own affiliates or divisions. They may:
   
   1. Employ an affiliate or division to provide brokerage, investment, administrative, custodial, or other account services for the trust; and
   2. Receive compensation for services performed by the affiliate or division, whether in the form of shared commissions, fees, or otherwise – provided the amount charged by the affiliate or division is disclosed and does not exceed the customary or prevailing amount that is charged by the affiliate or division for comparable services.

Question 13

Ascertaining Beneficiaries

Answer 13

1. The trustee must ascertain the identity and location of the beneficiaries (names, addresses, etc)

Question 14

Following the Terms of the Trust

Answer 14

1. Unless prohibited by law or public policy, the trustee must follow the terms of the trust instrument:
   
   1. Amount of distributions;
   2. Timing of distributions;
   3. Directions regarding investments;
   4. Directions regarding management;
   5. Discretionary language;
   6. Emergency clauses.
2. Remember, if terms of trust are silent, follow TTC.

Question 15

Supporting and Defending Trust

1. Generally
2. Liability of Trustee
3. When does trustee not have to prosecute?
4. who pays expense of defense

Answer 15

1. The trustee is responsible for:
   
   1. defending attacks on the validity of the trust and its administration; and
   2. defending attacks on trust property.
2. If the trustee does not defend attacks, then trustee may be held financially responsible.
   
   1. A trustee may not prosecute or assert a claim against a 3^rd party if each beneficiary of the trust provides written notice to the trustee of the beneficiary’s opposition to the trustee’s prosecuting or asserting the claim in the cause of action (see TTC 113.028).
3. May have duty to appeal decision
4. Expense of defending is generally paid by the trust (even if trustee loses ).

Question 16

Standard of Care for Investments -

1. Old Rule

Answer 16

1. Prudent Person Rule - degree of care and level of skill that a person of ordinary prudence would exercise with his/her own property, based on:
   
   1. Safety of investment;
   2. Appreciation potential; and
   3. Income generated.

Question 17

Standard of Care for Investments - New Rule

1. Generally
2. degree of care
3. terms of trust
4. exculpation
5. hindsight
6. monitoring and investigating investments
7. diversification
8. loyalty
9. impartiality

Answer 17

1. Generally - Prudent Investor Rule -
   
   1. reasonable care, skill, and caution to manage as a prudent investor would, considering the purposes, terms, distribution requirements, and other circumstances of the trust.
   2. investment and management decisions made in context of entire portfolio rather than one single investment.
2. Only Default Rule - only default rule, can be altered or eliminated by trust terms.
   
   1. Exculpation allowed for negligence but not intentional, reckless, or bad faith.
3. Hindsight - Court can’t use hindsight in evaluating trustee conduct.
4. Special Skills - a trustee with special skills or expertise has duty to use those skills/expertise
5. Monitoring and Investigating Investments - duty to monitor and investigate investments.
6. Diversification - duty to diversify unless good reason not to.
7. Loyalty - must invest and manage trust assets solely in the interest of the beneficiaries
8. Impartiality (see TTC 117.008) – “If a trust has two or more beneficiaries, the trustee shall act impartially in investing and managing the trust assets, taking into account any differing interests of the beneficiaries.”

Question 18

Duty of Loyalty -

1. Generally

Answer 18

1. Duty of Loyalty – A trustee owes the beneficiaries duties of undivided loyalty and utmost good faith with regard of trust matters.
   
   1. No conflicts of interest
   2. Trustee cannot profit (except for trustee fees)

Question 19

Duty of Loyalty -

1. Self-Dealing
   
   1. Sale of Trust Assets
2. Lending to Trustee
3. Loans to Beneficiaries?
4. Corporate Trustee Deposit Accounts?
5. Permitted self-dealing

Answer 19

1. Sale of Trust Assets - A trustee shall not directly or indirectly buy or sell trust property from or to:
   
   1. The trustee or an affiliate,
   2. A director, officer, or employee of the trustee
   3. A relative of the trustee (note that “relative” as defined in TTC 111.004(13) excludes uncles, aunts, nephews and nieces); or
   4. The trustee’s employer, partner, or other business associate.
2. Lending to Trustee - Unless expressly authorized by the trust instrument, a trustee is prohibited from lending trust funds to:
   
   1. The trustee or an affiliate;
   2. A director, officer, or employee of the trustee;
   3. A relative of the trustee (note that “relative” as defined in TTC 111.004(13) excludes uncles, aunts, nephews and nieces), or
   4. The trustee’s employer, employee, partner, or other business associate.
3. Loans to Beneficiaries - TTC 113.052 doesn’t prohibit a loan by a trustee to a beneficiary if the loan is expressly authorized or directed by the trust instrument.
4. Corporate trustees may deposit funds with itself if authorized by
   
   1. the settlor in the trust instrument or
   2. by a current qualified B in writing
5. Permitted Self-Dealing - A settlor who wants to permit self dealing should include a specific provision giving the trustee permission to self deal

Question 20

Duty of Loyalty -

1. Selling Between Trusts

Answer 20

1. Selling Between Trusts - a trustee of one trust may not sell sell property to another trust of which it is also trustee .
2. Exception
   
   1. A US government bond, note, bill, or other obligation issued or fully guaranteed by the United States; AND
   2. Sold for its current market price.

Question 21

Duty of Loyalty -

1. Duty of Impartiality

Answer 21

1. Duty of Impartiality – Trustee cannot favor one beneficiary over another unless the trust instrument expressly permits favoritism.
   
   1. Loyalty duties and investment duties are related.
   2. Could breach both

Question 22

Duty of Loyalty -

1. Trustee Self-Employment
2. Presumption
   
   1. Possible Exception?

Answer 22

1. Self employment is presumed to be a conflict of interest
   
   1. ​can’t charge extra for those services on top of trustee fees.
   2. As fiduciary, trustee should seek out best specialist possible within trust’s budget.

Question 23

Source of Trustee’s Powers

Answer 23

1. Trust Instrument – always look here first !!
   
   1. Generally, trumps everything (unless exception)
2. Trust Code (see TTC 113.002-113.028)
   
   1. Applies if the trust document is silent
3. Implied Powers (see TTC 113.002 & 113.024)
   
   1. Trustee is deemed to have powers needed to achieve the objectives of Settlor.
4. Court Order (see TTC 113.001 & 115.001)
   
   1. Courts may grant additional powers or restrict powers

Question 24

Delegating Duties -

1. General Rule
2. Who may a trust employ?

Answer 24

1. General Rule – can’t delegate discretionary decision making.
   
   1. OK to delegate duties if “reasonably necessary” in the administration of the trust.
      
      1. E.g., areas where trustee lacks experience
   2. A trustee may employ:
      
      1. attorneys,
      2. accountants,
      3. investment agents/brokers,
      4. Real estate managers,
      5. Tax preparation

Question 25

Delegating Duties -

1. Delegating managemetn and Investments

Answer 25

1. Delegating Management & Investments – TTC 117.011 - A trustee may delegate investment and management functions that a prudent trustee of comparable skills would properly delegate.
   
   1. The trustee shall exercise reasonable care, skill, and caution in:
      
      1. Selecting an agent,
      2. Establishing the scope and terms of the delegation, consistent with the purposes and terms of the trust, and
      3. Periodically reviewing the agent’s actions….
   2. Trustee’s Duty Shifts – A trustee who complies with the above, is generally not liable to the beneficiaries for the decisions or actions of the agent.
   3. Agent’s Duty – The agent owes a duty to the trust to exercise reasonable care to comply with the terms of delegation.

Question 26

Delegating Duties -

1. Investment Costs

Answer 26

1. Investment Costs (See TTC 117.009) – In investing and managing trust assets, a trustee may only incur costs that are appropriate and reasonable in relation to the assets, the purposes of the trust, and the skills of the trustee.
   
   1. In deciding whether to delegate, the trustee must balance the projected benefits against the likely costs.
   2. No double dipping – If the trustee’s regular compensation schedule presupposes that the trustee will conduct the investment management function, it should ordinarily follow that the trustee will lower its fee when delegating the investment function to an outside manager.

Question 27

Trust Protectors - generally

Answer 27

1. The Power to Direct (aka “Directed Trusts”)
   
   1. If a person isn’t 100% comfortable with their chosen trustee, appointing a trust protector might provide a solution.
2. The trustee manages the Trust on a day-to-day basis. The protector oversees the trustee and weighs-in on critical decisions (as prescribed in the Trust instrument).
3. There’s virtually no limit to the powers you can confer on a trust protector.
   
   1. Trust terms may give the trust protector the authority to direct, consent to, or disapprove a trustee’s actual or proposed investment, distribution, or other decisions.
4. It may be tempting to provide a protector with a broad range of powers, but this can hamper the trustee’s ability to manage the trust efficiently.
   
   1. The idea is to protect the integrity of the trust/beneficiary, not to appoint a co-trustee.
5. Texas Legislature enacted two sections:
   
   1. Trust Protector s for Charitable Trusts = TTC 114.003
   2. Trust Protectors for Non-Charitable Trusts = TTC 114.0031

Question 28

Trust Protectors - specific rules

Answer 28

1. Protector language must be included in trust instrument
2. Protector becomes fiduciary when exercising authority unless trust says otherwise
3. Trustee not liable
   
   1. For following TP orders except for willfull misconduct
   2. For TP failing to act after consent requested by Trustee except for willful or gross negligence.
4. Trustee has no duty of oversight of TP

Question 29

Trustee’s Duty to Make Property Productive

Answer 29

1. Holding cash fails to produce:
   
   1. Income for the income beneficiary
   2. Asset appreciation for the remainder beneficiary
2. Therefore, absent express language in the trust instrument, holding large amounts of cash for long periods of time (without a reason to do so) is a breach of a Trustee’s duty to make property productive
3. Trustee has a duty to treat all beneficiaries impartially and hold assets that produce income and grow in value over time

Question 30

What are the two main accounting buckets?

Answer 30

Income and Principal

Question 31

Allocation of Receipts/Expenses -

1. Order of Authority in Interpreting Allocations

Answer 31

1. Trust instrument governs (TTC 116.004(a)(1)&(2));
2. If trust instrument is silent, then look to the uniform principal and income act (TTC 116.001 – 116.206);
3. If the trust instrument and the TTC/uniform principal and income act are silent, then allocate receipt or expense to principal (see TTC 116.004(a)(4))
4. Principal is the default rule.

Question 32

Allocation of Receipts - Common Examples of Receipts of Principal

Answer 32

1. Gifts to trust by grantor(s)
2. Capital Gains
   
   1. Exception -
      
      1. Mutual Funds;
      2. Real Estate Investment Trusts (REIT)
3. Stock Dividends and Splits
4. Stocks from merger
5. Reinvested cash dividends
6. Insurance proceeds for capital asset or life insurance
7. refundable security deposits
8. Eminent Domain award

Question 33

Allocation of Receipts - Common Examples of Receipts of Income

Answer 33

1. Taxable and Tax Free Interest
2. Cash Dividends
   
   1. Exception - reinvested cahs dividends go to principal
3. Rents from Real and Personal Property

Question 34

Other Allocation of Receipts -

1. Business and Farm Receipts
2. Patents, Copyrights, Royalties
3. Oil/Gas/Water,etc
4. Timber
5. Annuities & Deferred Comp
6. IRA’s, 401k’s

Answer 34

1. Business and Farm Receipts – generally uses Generally Accepted Accounting Principles (GAAP) (TTC 116.153)
2. Patents, copyrights, royalties (liquidating assets) (TTC 116.173) –
   
   1. 10% to income
   2. 90% to principal
3. Oil/Gas/Water and other natural resources (TTC 116.174)
   
   1. Delay Rental = income
   2. Royalty, shut-in-well payment, or bonus = statute says “shall allocate the receipt _equitably_”
      
      1. Safe Harbor (i.e., presumed to be equitable)
         
         1. If the asset was owned prior to 2004, then can continue to use 72.5% to income, 27.5% to principal (old IRS depletion deduction)
         2. Otherwise, 85% income, 15% principal (current IRS depletion deduction)
   3. Renewable water = income
      
      1. Most water-sources are renewable as long as rain can get to it.
   4. Non-renewable water = equitably
4. Timber (TTC 116.175) - Income if does not exceed the rate of new growth – otherwise principal
5. Annuities & Deferred Compensation - If the payor (e.g., Fidelity) characterizes the payment as interest or dividend, then allocate to income – otherwise allocate to principal (see TTC 116.172(b))
6. IRAs, 401Ks – If the payor (e.g., Fidelity) characterizes the payment as interest or dividend, then allocate to income – otherwise the trustee shall allocate to income an amount that does not exceed 4% of the FMV of the account (less previous allocations to income for the yr).
   
   1. Example – A trust is a beneficiary of a $1 million IRA. The trust receives a $50,000 RMD. Because Fidelity didn’t characterize what part of the $50K was income, the trustee must allocate $40K to income (4%) and $10K to principal.

Question 35

Allocation of Receipts - Trust Disbursements

1. Trustee’s Fees
2. Repairs and Maintenance
3. Insurance Premiums
4. Mortgage Payments
5. Taxes

Answer 35

1. Trustee fees – 50/50 unless special circumstances
2. Corporate trustee fee for acceptance or termination/distribution – principal
3. Ordinary repairs and maintenance – income
4. Extraordinary repairs and maintenance to prep for sale – principal
5. Ordinary premiums on insurance – income
   
   1. Exceptions –
      
      1. Title insurance – P
      2. ILIT donations – P
6. Mortgage Payments on Property Owned by Trust – interest goes to income, principal goes to principal
7. Taxes –
   
   1. Local property – income
   2. Federal estate – principal
   3. Federal income – depends on how asset appreciates

Question 36

Allocation of Receipts -

1. When does B’s right to income begin and end?

Answer 36

1. Begins – date specified in trust instrument, otherwise date income bearing asset transferred to trust.
2. Ends –
   
   1. On the day before the income beneficiary dies;
   2. On the day before a terminating event.

Question 37

Allocation of Receipts - Trustee’s Power to Adjust

1. General Rule
2. Limitations
3. Notice
4. Court Intervention/Approval

Answer 37

1. Trustee has power to adjust between principal and income if:
   
   1. Can’t fairly be impartial under current standards
   2. Trust identifies income amount
   3. Trustee manages and invests trust assets as a prudent investor
2. Exceptions – power to adjust not allowed if
   
   1. Settlor prohibits
   2. Trustee is beneficiary
   3. Trustee would benefit from adjustment
   4. Adverse tax consequences
3. No notice to B’s required in Texas
4. Court Intervention –
   
   1. court may reverse if trustee abused discretion (e.g., not fair or reasonable or not impartial)
   2. trustee may seek court approval for adjustment

Question 38

Trustee’s Duty to Inform Beneficiaries -

1. General Rule
2. Can settlor limit duty to disclose?

Answer 38

1. Trustee has a duty to disclose information about the Trust to a beneficiary if:
   
   1. Beneficiary requests (wants to see books, asks for an accounting, etc), or
      
      1. 90 days to respond
      2. only required to account once in 12 month period
   2. Trustee takes material or unusual action affecting B’s interests.
2. However, under TTC 111.0035(c), the settlor may limit the duty to disclose in Trust instrument if:
   
   1. The trust is revocable,
   2. The beneficiary is under 25yrs of age, or
   3. The beneficiary is not eligible for current distributions or remainder distributions if the trust is terminated.

Question 39

Accountings -

1. Records
2. Periodic Accountings
3. Time to Respond?
   
   1. How Often?
4. What Needs to Be In the Account?

Answer 39

1. Records - must keep full and accurate records
2. Periodic Accountings - no periodic accountings required unless
   
   1. B specifically requests in writing or
   2. interested party has court order.
3. Time to Respond -
   
   1. Trustee has 90 days to account after written demand.
   2. Only has to account once in 12 month period (unless court order).
4. What Needs to Be In Accounting? – TTC 113.152 -A written statement of accounts shall show:
   
   1. Transactions – complete list of trust transactions.
   2. All Trust Property (including new trust property not previously disclosed)
   3. Cash – Cash balance and where it is located
   4. Liabilities – all known liabilities owed by the trust

Question 40

Trustee Compensation

Answer 40

1. Trustee is entitled to “reasonable compensation”
2. If fee is not set out in trust document, trustee may take fee from trust without court approval.
   
   1. Beneficiary or co-trustee may seek judicial review
3. Factors used to determine reasonable compensation
   
   1. Amount of time trustee works on trust
   2. Gross income of trust
   3. Appreciation of value of trust
   4. Trustees unusual or special skills
   5. Trustee’s degree of loyalty to trust
   6. Amount of risk/responsibility of trustee
   7. Fees charged by other trustees in community
   8. Character of trustee’s work
   9. Trustees own estimate of value of services

Question 41

Trust Modifications - By the Court

1. General Rule
2. What Can Court Do?
3. Reasons for Termination/Modification

Answer 41

1. Court may modify or terminate trust in manner that conforms as nearly as possible to settlor’s intent.
2. On petition by trustee or beneficiary, court may order
   
   1. Termination
   2. Modification
   3. Change Trustees
   4. Trustee to do acts not allowed in trust doc (and vice versa)
3. Reasons for Modification/Termination
   
   1. Trust Purpose - Purpose of trust fulfilled or now illegal
   2. Change in Circumstances - Change in circumstances unanticipated by settlor and order will further trust purposes
   3. Waste/Impairment - Modification necessary to prevent waste or avoid impairment
   4. Taxes - Necessary to achieve tax objectives and not contrary to settlor intentions
   5. All B’s Consent - All B’s consent, continuance not necessary to achieve material purpose and not inconsistent with material purpose

Question 42

Trust Modifications - By the Settlor

Answer 42

1. The settlor may modify, amend, or revoke a trust that is “revocable”:
   
   1. However, the settlor may not enlarge the duties of the trustee without the trustee’s consent
2. If the trust was created by a written instrument, a revocation, modification, or amendment of the trust must also be in writing.
3. Once a revocable trust becomes irrevocable, then the settlor can no longer modify, amend, or revoke the trust (unless trust doc permits)

Question 43

Trust Modification - by Trustee

Answer 43

1. Generally, a Trustee has no power to amend the trust (unless the trust allows it).
   
   1. Exceptions –
      
      1. Trustee may divide or merge trust if the result does not impair the rights of the beneficiaries or adversely affect the achievement of the purposes of the original trust (TTC 112.057
      2. Trustee may exercise Cy Pres (allocate trust corpus to a new charity) for charitable trusts (TTC 113.026) without a court order if:
         
         1. The charity did not exist when the interest vested;
         2. The charity ceases to exist;
         3. The charity ceases to be charitable in nature.
      3. Decanting (see below)

Question 44

Decanting -

1. Definition
2. Permissible or Required?
3. Degree of Care
4. Effect of Discretion
5. Court approval
6. Limitations
7. Required Documents

Answer 44

1. Decanting – trustee with discretion can distribute trust assets from one trust to another trust
   
   1. No duty to decant
   2. Decanting permitted unless trust doc says otherwise
   3. Discretion - must be in good faith, per terms and purposes of trust, and in interest of B
   4. Court Approval –
      
      1. Generally not required
      2. Need court approval to decant to change trustee compensation.
2. Effect of Discretion
   
   1. Full Discretion – not limited in any way by trust instrument.
      
      1. May distribute principal to another trust for benefit of current B’s
   2. Limited Discretion – mandatory distribution or distribution by some limited standard such as HEMS
      
      1. can distribut principal to another trust but can’t change B’s
3. Limitations – trustee cannot decant to
   
   1. Reduce current B’s right to distributions
   2. Materially reduce trustee fiduciary duties
   3. Exonerate trustee for breach or negligence
   4. Eliminate power to remove/replace trustee
   5. Modify perpetutities period
   6. Modify intended tax benefits that would be lost
4. Required Documents
   
   1. Written Notice to all B’s 30 days before
      
      1. B can object
   2. Trustee resolution – acknowledgment signed by trustee in 1^st and 2d trust
   3. New trust document

Question 45

Release of Liablity by Beneficiary -

1. General Rule
2. Requirements

Answer 45

1. General Rule – beneficiary may relieve trustee of any duty, responsibility, or liability as to that beneficiary, including past violations.
2. Requirements –
   
   1. Writing and Delivery - Release must be in writing and delivered to trustee
   2. Full disclosure – beneficiary must have full knowledge of material facts.

Question 46

Release of Liablity by Beneficiary - Effect of Release

1. Adults
2. Minors
3. Unborn/Unascertainable Beneficiaries

Answer 46

1. Adults – release is valid if
   
   1. Writing signed and delivered to trustee
   2. Full disclosure
2. Minors – release is valid if
   
   1. Writing signed and delivered to trustee
   2. Full disclosure to minor’s parent
   3. Minor’s parent signs on his behalf
   4. No conflict of interest
   5. No guardian appointed
3. Unborn/Unascertainable – release is valid if
   
   1. release signed by B with identical interest signs release or
   2. unascertained B signs

Question 47

Family Settlements

Answer 47

Parties may agree to a settlement which includes various changes to the terms of the trust document (pretty much anything can be changed in trust that is legal).

Question 48

Events That Cause Termination of the Trust

Answer 48

1. Express terms of trust (e.g., “when my child turns 20 years old)
2. Revocation by settlor (revocable trust)
3. Exhaustion of Trust Property – if there is no trust property, the trust is by definition not a trust.
   
   1. Uneconomical Trust - (see TTC 112.059)–
      
      1. If the cumulative value of the assets of a trust has a value of less than $50,000, the trustee may terminate the trust if the trustee concludes (after considering the purpose of the trust and the nature of the trust assets) that the value of the trust is insufficient to justify the continued cost of administration.
      2. The trustee shall distribute the property in a manner consistent with the purpose of the trust
4. Court Order
5. Merger – all legal/equitable title are reunited a single person