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Trustee Powers

Northern Trust is often faced with circumstances where more authority is needed to carry forward a trust’s material purpose and serve the beneficiaries' best interests.

Introduction

Northern Trust is often faced with circumstances where more authority is needed to carry forward a trust’s material purpose and serve the beneficiaries’ best interests.

These include the ability to act jointly with an individual trustee – an arrangement that is often most effective – as well as the ability to manage digital assets, terminate small, uneconomical trusts and enable a surviving spouse to use an unused exclusion. The following provisions are included to enable Northern Trust to act more effectively in these types of situations.

Section 01

Co-Trustee Language

The individual Trustees shall have jointly with the corporate Trustee all the powers given the Trustees, except that no individual Trustee shall (a) participate in the exercise of (i) any tax election or allocation which affects such Trustee’s interests or the interests of any person whom such Trustee is legally obligated to support or (ii) any discretion to determine the propriety or amount of payments or distributions of income or principal to such Trustee or to any person whom such Trustee is legally obligated to support, or (b) possess any incident of ownership with respect to any policy of insurance on his or her life. Only the Trustees or Trustee qualified to participate in such tax election, allocation or discretion or to possess such incident of ownership shall exercise that tax election, allocation or discretion and possess that incident of ownership. For all purposes of this trust agreement, the term “Trustee” shall mean the Trustees or Trustee from time to time qualified and acting, and the term “corporate Trustee” shall mean The Northern Trust Company and any successor to it from time to time qualified and acting. The compensation, if any, of the individual Trustees shall be in addition to the full fee of the corporate Trustee. The corporate Trustee shall have sole custody of the trust property and records.

Except as otherwise provided, the Trustees shall act by a majority. If the Trustees qualified to participate in an action or decision of the Trustees are evenly divided, the vote of the [corporate Trustee] [individual Trustee] shall control. Any Trustee who is not qualified to participate in an action or decision of the Trustees and any dissenting Trustee shall have no liability for the acts of the majority.

Any Trustee may resign at any time by written notice to each other Trustee then acting and to each beneficiary then entitled to receive or eligible to have the benefit of the income from the trust.

In case of the death, resignation, refusal or inability to act of any individual Trustee acting or appointed to act hereunder, the remaining Trustees or Trustee shall have all the powers given the originally named Trustees.

Note: If desired, the drafting attorney may add a provision for the appointment of a successor individual Trustee.

Section 02

Access and Disposition of Digital Assets

Powers Regarding Digital Property

  1. My [Executor] [Trustee] shall have all power and authority: (a) to access, use, and control my digital devices, including but not limited to any digital device or data storage device or other medium of mine, such as personal computers, laptops, tablets, peripherals, mobile phones, smart phones, flash drives, remote servers, networks, cloud storage units, and any other digital hardware or storage device that currently exists or may exist in the future as technology develops; (b) to access, modify, archive, delete, control, and transfer and otherwise manage my digital assets, including but not limited to any files of mine, such as emails sent and received by me, documents, images, digital music, digital photographs, digital videos, software licenses, domain registrations and similar digital items which currently exist or may exist in the future as technology develops, that are created, produced, sent, communicated, shared, received or stored in the cloud or on a digital device, regardless of the ownership of such device; and (c) to access, modify, delete, control, continue, transfer and otherwise manage my digital accounts on any website, including but not limited to the following types of online user accounts of mine: social media, social network, blogs, listservs, online storage, file sharing, financial management, domain registration, domain name services, web hosting, tax preparation service, online stores, retail vendors, affiliate programs, gaming accounts, and loyalty programs. My [Executor] [Trustee] shall have the power to hire consultants and delegate to agents such of these powers and authorities as my [Executor] [Trustee] deems necessary to assist my [Executor] [Trustee] in decrypting electronically stored information of mine or in bypassing, resetting, or recovering any password or other kind of authentication or authorization.
  2. I hereby authorize any individual or entity that carries, maintains, receives, possesses, custodies, or controls any electronically stored information of mine, or that provides to me an electronic-communication service or remote-computing service, whether public or private, to divulge to my [Executor] [Trustee] at any time: (a) any electronically stored information of mine; (b) the contents of any communication of mine that is in electronic storage by that service or that is carried or maintained on that service; and (c) any record or other information pertaining to me with respect to that service. The terms used in this authorization are to be construed as broadly as possible.
  3. This authority granted to my [Executor] [Trustee] is intended to constitute “lawful consent” under the Electronic Communications Privacy Act of 1986, as amended, the Computer Fraud and Abuse Act of 1986, as amended, and any other applicable federal or state data privacy law or criminal law, and my [Executor] [Trustee] shall be deemed to be an authorized user for purposes of applicable computer-fraud and unauthorized-computer-access laws.

Note that because digital assets are often not held in trust, some commentators recommend including digital asset language in wills, trusts, and in durable powers of attorney.

Section 03

Portability

Version 1 – Will

The Executor shall take all actions necessary to make a valid election under Section 2010(c)(4) of the Internal Revenue Code of 1986, as amended and as in effect from time to time, to allow my surviving spouse to have the benefit of my deceased spousal unused exclusion amount, if any, to the greatest extent permitted under applicable federal tax law, even if it appears unclear that my spouse or my spouse’s estate could benefit from such exclusion amount and even if a federal estate tax return is not otherwise required to be filed for my estate. The Executor is authorized to pay any expenses or costs associated with making such election as an expense of administration.

Version 2 – Trust

To the extent no Executor is appointed for my estate, the Trustee shall take all actions necessary to make a valid election under Section 2010(c)(4) of the Internal Revenue Code of 1986, as amended and as in effect from time to time, to allow my surviving spouse to have the benefit of my deceased spousal unused exclusion amount, if any, to the greatest extent permitted under applicable federal tax law, even if it appears unclear that my spouse or my spouse’s estate could benefit from such exclusion amount and even if a federal estate tax return is not otherwise required to be filed for my estate. The Trustee is authorized to pay any expenses or costs associated with making such election as an expense of administration. In the event the Executor of my estate fails to make such election, I direct the Trustee to make such election independent of the Executor.

Section 04

Small Trust Termination

The corporate Trustee in its discretion may terminate and distribute any trust hereunder if the corporate Trustee determines that the costs of continuing the trust will impair accomplishment of one or more purposes of the trust. In addition, the corporate Trustee shall terminate and distribute any trust created under this instrument, or by exercise of a power of appointment granted hereunder, which is still held at the end of the period allowed by the applicable rule against perpetuities, if any. Distribution under this Section shall be made to the persons then entitled to receive or eligible to have the benefit of the income from the trust in the proportions in which they are entitled thereto, or if their interests are indefinite, to those persons per stirpes if they have a common ancestor, or if they have no common ancestor, then in equal shares. Any decision made or action taken or omitted by the Trustee pursuant to the power granted in this section shall be conclusive and binding on all beneficiaries and parties interested in the trust.

Section 05

Leverage Conflict Waiver – Northern Trust as Trustee and Lender

From time to time, one or more of the Trust, the Grantor, the Grantor’s spouse, the individual acting as Trustee, and/or one or more entities the interests in which are held directly or indirectly by the Trust, may have or wish to enter into a loan (“Loan”) with the corporate Trustee in its individual capacity (the “Lender”). Having the corporate Trustee acting as both Trustee and Lender poses a conflict of interest because as Trustee, the corporate Trustee has a fiduciary duty to preserve the trust property for the beneficiaries, while as Lender, the corporate Trustee will be a direct or indirect creditor of the trust and in the position of seeking repayment on favorable terms of the Loan from the trust and therefore from the trust property. These competing interests as Lender and as Trustee shall be referred to as the “Conflict of Interest.”

The Grantor specifically (a) waives the corporate Trustee’s Conflict of Interest, and (b) authorizes the corporate Trustee as Trustee to take any action or omit to take any action in good faith related to the Loan, including but not limited to any participation as Trustee in any decision as to when and whether to enter into and repay the Loan or to deal with the collateral and any security interest therein, as though the Conflict of Interest did not exist. The corporate Trustee shall not be liable for any action or omission taken by the corporate Trustee as Trustee in good faith with respect to the Loan, or any action or omission taken by the Lender pursuant to the Loan or any security interest related thereto while the Loan is outstanding, including but not limited to any decision to pursue the Lender’s rights as a security interest holder in the event of any default.

Section 06

Trustee Compensation

The Trustee shall be reimbursed for all reasonable expenses incurred in the management and protection of the trust, and any corporate Trustee shall receive compensation for its services in accordance with its schedule of fees in effect from time to time. A Trustee’s regular compensation shall be charged against income and principal as provided under this trust agreement, and otherwise as provided by applicable state law.

Section 07

New York Language Authorizing Affiliated Investments

Note: This language is designed to authorize Northern Trust, under New York law, to invest in and receive compensation for the portion of the trust invested in Northern Trust registered funds (such as mutual funds and exchange-traded funds) and unregistered funds (such as private equity or hedge funds).

The Trustee [of any trust created hereunder] is authorized to invest in, retain or otherwise deal in any shares or interests in any (i) private investment fund, including a private investment fund organized as a limited partnership, limited liability company, trust or other form, or (ii) management type investment company or investment trust registered, unregistered, or exempt from registration under the Investment Company Act of 1940, (each of the entities described in the foregoing (i) and (ii), a “Fund”), notwithstanding that the Trustee or an affiliate of the Trustee provides services for compensation to such Fund. Notwithstanding the requirements of Section 11-2.3(d) of the New York Estates, Powers and Trusts Law to the contrary, as the same may be in effect from time to time, or any successor provision, the Trustee is authorized to receive annual corporate trustees’ commissions or other compensation with respect to the portion of the trust invested in shares or interests of a Fund, notwithstanding that the Trustee or its affiliate also receives compensation from the Fund for services provided thereto, including but not limited to, as investment advisor, custodian, transfer agent, registrar, sponsor, distributor, manager or general partner. In addition, the Trustee is authorized to otherwise deal or transact business with any of its affiliates, notwithstanding that the Trustee or its affiliate may receive separate fees, commissions, costs or other compensation directly as a result of such dealing or transaction.

Explore More Provisions

Our collection of will and trust provisions offers a path forward for grantors to fulfill their vision while meeting the needs of future generations.

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LEARN MORE ABOUT OUR MODERN TRUST PROVISIONS

We welcome opportunities to work with other advisors to help shared clients fully realize the goals they have for their wealth. To explore how we can collaborate, or request a copy of our Modern Trust Provisions, please request a meeting.

Disclosures

This collection of sample trust provisions is designed to be used by estate planning attorneys only. If you are not an estate planning attorney, please consult with one. This collection of sample trust provisions is made available with the understanding that neither Northern Trust nor any individual who worked on these provisions is rendering legal, accounting, or other professional services through the presentation of this collection.

Although the collection of sample trust provisions is the product of much thought and effort, using this collection is not a substitute for informed legal judgment. The attorney must make an independent determination as to whether a particular sample provision is generally appropriate for a client’s trust documents, how it must be modified for applicable state law and to meet any special circumstances and objectives of the client, and whether or not a different provision or provisions not included in these materials would be better suited for a given client or client situation.

Northern Trust makes no representation that any provision in these materials effectively accomplishes its purpose or is valid under applicable state law. Northern Trust reserves the right to require different or revised provisions in the trusts it administers. Northern Trust assumes no responsibility for the sample provisions or their use. By using a sample provision from this collection, the attorney acknowledges that the attorney (and not Northern Trust) is responsible for any document which the attorney prepares that includes any such provision. The attorney must adapt and customize the sample provision(s) for the law of the applicable state and the client’s specific situation.

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