Presenting a live 90-minute webinar with interactive Q&A Structuring Trust Protector Provisions: Powers & Duties, Trustee Oversight, Tax and Fiduciary Risks Avoiding Unintentional Fiduciary Classification, Navigating State Differences WEDNESDAY, SEPTEMBER 27, 2017 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Alexander A. Bove, Jr., Partner, Program Chair, Bove & Langa , Boston William Kalish, Partner, Johnson Pope Bokor Ruppel & Burns , Tampa, Fla. Susan J. Merritt, Senior Vice President | Senior Fiduciary Officer, Northern Trust , Newport Beach, Calif. Elizabeth T . Meck, Vice President | Personal Trust Administration, Northern Trust , Denver The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 . NOTE: If you are seeking CPE credit, you must listen via your computer — phone listening is no longer permitted.
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Your Presenters Alexander A. Bove, Jr. Susan Merritt Bove & Langa The Northern Trust Company Direct: 617.720.6040 Direct: 303.335.1401 bove@bovelanga.com sjm13@ntrs.com William "Bill" Kalish Elizabeth Meck Johnson Pope The Northern Trust Company Direct: 813.501.3956 Direct: 303.335.1412 williamk@jpfirm.com etm3@ntrs.com
Structuring Trust Protector Provisions: Powers & Duties, Trustee Oversight, Tax and Fiduciary Risks Outline • Introduction • The use of trust protectors across the United States • Powers granted to the trust protector • Is a trust protector a fiduciary • Discussion 6 NTAC:4UC-11
Introduction 7 NTAC:4UC-11
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Trust Protectors Across the United States 13 NTAC:4UC-11
What is a Protector in the U.S.? ‒ Historic background – adoption from offshore trust practices. ‒ May be defined in statutes. Uniform Trust Code § 808 (b) – (d) provisions may apply where states have adopted UTC. The following states have adopted the UTC: Alabama, Arizona, Arkansas, District of Columbia, Florida, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Vermont, Virginia, West Virginia, Wisconsin, and Wyoming. 14 NTAC:4UC-11
What is a Protector in the U.S.? ‒ The following non-UTC states permit the use of trust protectors: • Alaska, Delaware, Georgia, Illinois, Indiana, Nevada, Rhode island, South Dakota, Texas, and Washington. ‒ Provisions permitting trust protectors can be incorporated into a trust instrument even without statutory authority. 15 NTAC:4UC-11
Trust Protector Powers: - Powers Related to the Trustee - Powers Unrelated to the Trustee 16 NTAC:4UC-11
Trust Protector Powers – two categories: Powers related to the trustee Powers unrelated to the trustee Power to remove and replace an acting trustee Power to change the situs of the trust Power to appoint additional trustees Power to change the governing law of the trust Power to act as a tiebreaker when multiple trustees reach an impasse Power to terminate the trust under certain defined conditions Approval authority for discretionary distributions or the sale or Power to amend the trust for any valid purpose, such as to respond to management of specific assets changes in federal or state tax law Power to alter the beneficial interests in the trust, such as to add or Power to veto decisions made by the trustee remove beneficiaries 17 NTAC:4UC-11
Trust Protector Powers • Specific powers given to the TP generally include one or more of the following: – To determine whether an event of duress has occurred. – To approve accounts. – To settle disputes between the TEE and BEN or among BENs. 18 NTAC:4UC-11
Trust Protector Powers • TP’s powers typically can take on one of four forms: – Direction (power to direct an action involving the administration of the trust or to make distributions from the trust). – Veto Power. – Power to consent to the TEE’s action. – Power to initiate change (such as the power to amend the trust or remove the TEE). 19 NTAC:4UC-11
Trust Protector Powers • Are the TP’s powers superior to those of the Trustee? — The Trustee’s duty is to administer the trust according to its terms. — The TP (depending on the extent of the TP’s powers) may direct the Trustee otherwise. 20 NTAC:4UC-11
Source of the Trust Protector Powers 22 NTAC:4UC-11
Source of the specific powers • Some trust protector statutes specify the powers. • For example, Nevada Statutes provides for the powers of a Trust Protector NRS 163.555: 1. A trust protector may exercise the powers provided to the trust protector in the instrument in the best interests of the trust. The powers exercised by a trust protector are at the sole discretion of the trust protector and are binding on all other persons. The powers granted to a trust protector may include, without limitation, the power to: a) Modify or amend the instrument to achieve a more favorable tax status or to respond to changes in federal or state law. b) Modify or amend the instrument to take advantage of changes in the rule against perpetuities, restraints on alienation or other state laws restricting the terms of a trust, the distribution of trust property or the administration of the trust. c) Increase or decrease the interests of any beneficiary under the trust. d) Modify the terms of any power of appointment granted by the trust. A modification or amendment may not grant a beneficial interest to a person which was not specifically provided for under the trust instrument. e) Remove and appoint a trustee, trust adviser, investment committee member or distribution committee member. f) Terminate the trust. g) Direct or veto trust distributions. h) Change the location or governing law of the trust. i) Appoint a successor trust protector or trust adviser. j) Interpret terms of the instrument at the request of the trustee. k) Advise the trustee on matters concerning a beneficiary. l) Review and approve a trustee’s reports or accounting. 23 NTAC:4UC-11
Source of the specific powers • Some statutes do not provide specific powers – Florida statute ‒ F.S. 736.0808 – “Powers to Direct” ‒ Relevant case law, Minassian v. Rachins, So.3d, 2014 WL 6775269 (Fla. 4 th DCA December 3, 2014) Florida appellate court sanctioned the use of trust protectors in a Florida trust proceeding 24 NTAC:4UC-11
Distinction Between a Trust “Adviser” and a Trust “Protector” • Look to the instrument and state law. • Power to control a trustee with regard to the exercise of certain powers. • Trust Adviser as a third-party decision maker. 25 NTAC:4UC-11
Additional Issues to Consider • Careful consideration needs to be given – Powers – Role – Individual to be appointed – Appointment of Successor Protector – Who can Remove a Protector? 26 NTAC:4UC-11
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