If the trustee or his accountant or accountant prepares the cheques and the agent only signs them, the measure may be considered ministerial. If the officer issues a cheque to buy hay for cattle on a ranch, it could be a ministerial decision if it is a routine function. If the agent issues a cheque to purchase an adjacent property or make a significant improvement to a property owned by a trust, this is likely a discretionary function reserved for the trustee. You are the local banker. An older husband and wife are long-time customers of your bank. They have a modest fortune and have set up a living trust in order to avoid the cost of succession. If they both sign as co-trustees, can they add their daughter, who lives in another state, as a co-signer to the living escrow account? This article will briefly discuss common situations where a trustee may delegate authority. It also considers what the trustee should look for when conducting such delegations and how to delegate in a way that reduces the risk of liability for beneficiaries on the road. When is delegation allowed? Simply put, Texas law allows a trustee to delegate tasks and powers that a trustee in a similar situation with similar fiduciary assets would assign to a third party. The Texas Property Code states that “[a] trustee may employ attorneys, accountants, agents, including investment agents, and brokers reasonably necessary to manage the trust`s assets.” Tex.
Support. Code § 113.018(a). Agents are “reasonably necessary” if a reasonable owner of the same type of property as the trust and who held the property for reasons similar to those of the trust sought outside assistance. Gerry W. Beyer, Texas Estate Planning Statutes with Comment 714 (2015). Delegate authority in a real estate transaction During real estate transactions, it is common for a trustee to delegate powers to an agent. Texas law assigns a special responsibility to the trustee in this regard. See Texas Property Code § 113.018(b)-(c)). This particular responsibility applies if the agent is employed for: A third type of law that can affect the transfer of duties by the trustee to an agent is the law that defines the types of accounts allowed by state law. The law can define account types, such as accounts. Individual B, condominium accounts, accounts with survivors` rights, convenience accounts, POD accounts (payable on death), escrow accounts or business accounts.
It can also set the rights of the owners of each type of account. For example, the law could allow for the addition of a convenience signer for an individual or joint account, but not for an escrow account. Unlike a directed trust, which gives control of the investment to a person other than the trustee (i.e., An investment committee or advisor), the trustee delegating with a delegated trust is responsible for due diligence in both the selection of investment advisors and the monitoring of their performance. The task is delegated; not the risk. In addition, all delegated trusts will be invested in accordance with the provisions of the fiduciary document and an investment policy statement agreed to with the trustees and investment managers/advisors. The bank should not be able to audit escrow accounts to determine whether the trustee or agent is performing their duties properly. The trustee ultimately determines which functions should be retained and which functions should be delegated. Even a court may not have the power to interfere with a trustee`s discretionary powers, except in cases of fraud, misconduct, or overt abuse of judgment.
How does a bank protect itself? First, the bank should exercise caution when allowing a non-trustee to exercise banking powers. Generally, only the trustee is authorized to act on behalf of the trust. Even the beneficiaries do not have authority over the assets of the trust. Therefore, special verification must be applied when adding agents to an account. The bank should need legal authority to support the trustee`s right to delegate an escrow function to an agent. Another client was appointed trustee for his parents` irrevocable trust. He has a full-time job, but his wife has offered to help him with administrative tasks. Can he add his wife to the escrow account as a convenience signer? Each of these three activities must be taken seriously. When selecting an agent to invest in or manage fiduciary real estate, a trustee should interview multiple candidates, review their recommendations, consider their qualifications, and document this process of finding candidates for future references. If a trustee chooses a family member or close friend to manage the trust`s assets, or arbitrarily chooses someone without regard to other potential agents, they risk being sued for violating the Texas Property Code`s “prudent investor rule.” See General, Tex. Support. Code § 117 Living trusts pose unique problems for the delegation of trust functions.
A living trust is not considered a creature of the state, as a testamentary or inter vivo trust would. It is often set up to manage family assets, so specialized expertise such as that of investment brokers or real estate agents may not be involved. Fiduciary assets may not be particularly complex. They function as individual accounts until the person becomes unable to work or dies. Due to the personal nature of the account, the trustee may want to add a family member to the account as a co-signer. However, the addition of a family member as a co-owner may give the agent rights to trust assets that are inconsistent with the economic interests of the trust. Legal requirements allowing the addition of convenience signers to personal accounts may not apply to escrow accounts. In addition, in the event of incapacity for work, there may be fewer (or no) checks on the representative by the trustee. As a result, some banks issue policies that exclude the addition of co-signers or comfort signers for revocable or living escrow accounts. The first place to seek this authority is, of course, the instrument of trust. Does it authorize or prevent the agent from delegating powers to representatives? Second, the bank should seek legal powers as to the powers that a trustee can delegate to an agent.
Some states, such as Illinois, impose a legal duty on the trustee “not to delegate to others the performance of actions involving the exercise of judgment and discretion, unless they constitute investment functions.” 60 ILCS 5/5.1 (a). A number of States identify specialized areas of expertise where delegation is appropriate. These are often lawyers, accountants, real estate agents, investment agents and brokers who are “reasonably necessary for the management of the trust`s assets.” See e.B. Tex. Support. Code § 113.018(a). A number of States also explicitly allow the delegation of investment functions. See e.B.
Tex. Support. Code § 117.011. However, in the transfer, the syndic must exercise due diligence in the selection of the representative; determine the scope and conditions of the delegation of authority; and to regularly review the actions of the agent to monitor its execution and compliance with the conditions of delegation. These restrictions limit the scope of the agent`s powers and require the trustee to oversee the agent`s actions. If the trustee does these things, he or she is not liable to the beneficiaries or the trust for the advisor`s decisions. Note, however, that these bylaws do not authorize agents to bank for the trust. .