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Modern Investing and Special Assets

Trust provisions for navigating new investment philosophies including ESG and alternative investments

Introduction

Grantors and beneficiaries have become increasingly interested in incorporating environmental, social and governance (ESG) considerations into their investment portfolios.

At the same time, access to and interest in alternative investments has been rising as investors seek different sources of return. These types of investments, however, can sometimes be at odds with fiduciary duties, including those imposed on trustees by the Prudent Investor Rule, which requires trustees to diversify among assets, focus on performance and control risk.

The following trust provisions are intended to guide clients, trustees and advisors as they navigate the potential conflict between applicable laws and families’ desire to take advantage of new investment philosophies, including ESG investments. In many instances, the traditional portfolio approach and performance metrics are becoming incongruent with grantor intent and the ever-changing investment landscape. We have also included several provisions related to the retention and acquisition of special assets, residences and concentrations.

Section 01

Alternative Assets and Affiliated Investments

The Trustee is authorized to invest in, retain, or otherwise deal in any securities or other property, real or personal, within or outside the United States, including, without limitation, any of the following (collectively, “Trust Investments”): any security as defined by the Securities Act of 1933, any contract of sale of a commodity for future delivery within the meaning of the Commodity Exchange Act, shares or interests in any private investment fund, private equity or venture capital fund, hedge fund, common trust fund, joint venture, general or limited partnership, limited liability company, statutory or common law trust, real estate investment trust or an open-end (including any mutual fund or exchange traded fund) or closed-end management type investment company or unit investment trust, whether registered under the Investment Company Act of 1940 or unregistered, any money market instrument, bank deposit account (including but not limited to savings, time, certificate of deposit and transaction accounts), precious metal, foreign exchange, structured product, insurance contract, options, options on futures and variable forward contracts, swaps, caps, collars and other derivative instruments of a financial nature.

The Trustee, any investment manager, custodian, or their respective parent or affiliate may provide services with respect to any Trust Investment (whether as manager, issuer, underwriter, distributor, custodian, advisor, agent, or otherwise) and may receive compensation in addition to Trustee’s compensation for such services, including but not limited to management fees, commissions, performance fees, carried interest and other profit participation payments (“Additional Compensation”). “Carried interest” means the profits interest in a Trust Investment allocated to the investment manager or general partner that exceeds its share of contributed capital.

To the extent permitted by local law, this provision is intended to be a specific override of any contrary provision of law prohibiting Additional Compensation or requiring a reduction in the Trustee’s compensation or election between the Trustee’s compensation and Additional Compensation. Any diversification requirement under applicable law that would otherwise apply is expressly negated and shall not apply to the trust.

Employment of and Dealings with Affiliated Agents

Conflicts of interest may arise by virtue of the powers granted to the Trustee in this trust agreement. The Trustee is expressly exempted from the adverse operation of any rule of law that might otherwise apply to the Trustee in the performance of its fiduciary duties by reason of conflict of interest. Notwithstanding any duty otherwise existing hereunder or at law or in equity, the Trustee shall have no greater burden to justify its acts as a fiduciary by reason of conflict of interest than it would have in the absence of any conflict.
The Trustee is authorized without notice to or consent by any beneficiary or court and without any disclosure required by applicable law, to engage any corporation, partnership, limited liability company or other entity that is a subsidiary or affiliate of a corporate trustee serving hereunder and/ or any individual who is a partner, director, member, manager, officer or employee of any such subsidiary or affiliate (individually and collectively, an “Affiliate”), to act as agent of or render services to the trust, to delegate discretionary authority to any Affiliate and to pay customary fees and compensation to such Affiliate without reduction of any compensation paid to the Trustee. Any Affiliate appointed by the Trustee, is hereby authorized:
1. To appoint one or more Affiliates to manage in its or their sole discretion the investment of all or any portion of the trust’s assets or to provide non-discretionary investment advice;
2. To appoint one or more Affiliates to act as custodian of all or any portion of the trust’s assets and, in connection therewith, to cause such assets to be held in any jurisdiction by or in the name of any nominee of the Trustee or an Affiliate;
3. To engage one or more Affiliates to provide trust administration or recordkeeping services for the trust;
4. To use, engage or hire any Affiliate as broker, dealer, principal or agent in the purchase or sale of stocks, bonds or other securities or property for the account of the trust;
5. To purchase from or sell to any Affiliate any stock, bonds or other securities or property and to engage in agency cross transactions with any Affiliate, in each case at such price and upon such terms as the Trustee and such Affiliate may deem advisable;
6. To invest any funds in the trust in any stocks, bonds, or other securities or property, real or personal, of whatsoever kind or nature, which may be distributed, underwritten, managed or issued by or through an Affiliate, and from which an Affiliate may receive fees or other compensation, including carried interest or other profit participation payments;
7. To make any investment or enter into any transaction which may directly or indirectly benefit any Affiliate or in which any Affiliate has an interest; and
8. To grant proxies to any Affiliate or to exercise any voting or consent rights pertaining to any securities or other property held in the trust in a manner which may directly or indirectly benefit or advance the interests of any Affiliate.

Section 02

Environmental, Social, and Corporate Governance (ESG) Investment Authorization

With the continued increase in sustainable investing globally, many grantors and beneficiaries will expect their trustees to integrate environmental, social or governance factors when selecting trust investments. The language below offers two options: incorporation of a grantor’s values and beliefs or incorporation of a beneficiaries’ values and beliefs by trustees in the investment process. It is possible a grantor will want to allow for consideration of both, which is feasible if the provisions are coordinated to determine whose values and beliefs are to be given effect if they conflict.

Sample Provisions 1

The Trustee is expressly authorized to acquire and retain investments not regarded as traditional for trusts, including, without limitation, investments that integrate environmental, social and corporate governance (ESG) considerations, regardless of whether such ESG considerations and investments would otherwise be regarded as imprudent, improper, a violation of the duty of loyalty, or otherwise unlawful under [insert specific reference to state law]. Any applicable jurisdiction’s “prudent person” or “prudent investor” rule, duty of loyalty, or any other rule of applicable state law that would restrict the Trustee’s ability to take ESG considerations into account are expressly waived with respect to such investments. The Trustee has full discretion to engage in one or more sustainable, socially responsible or ESG investment strategies, in addition to, or in place of, other investment strategies. When making investment decisions, the Trustee may consider the financial needs of beneficiaries as well as the beneficiaries’ personal values, including the beneficiaries’ desire to engage in ESG investment strategies that align with the beneficiaries’ values or beliefs. The Trustee may rely upon any written statement of values, including a family mission statement, from the beneficiaries, however, no such written statement of values shall be required for the Trustee to integrate ESG factors into its investment decisions.

For purposes of identifying the values or beliefs of the beneficiaries, the trustee shall consider only [the interests of the Primary Beneficiary of the Trust] or [the beneficiaries who are at the time an investment decision is made are permitted distributees of current income or principal] or [who are in the most senior generation of current beneficiaries from time to time].To the extent integration of ESG factors in investment decision making may be inconsistent with any duty of impartiality as to future beneficiaries of the trust, such duty shall not exist and is expressly waived.

Grantors who engage in ESG investing during their lifetime may consider adding a clear statement regarding their perspective on the integration of ESG factors into the trust portfolio along with a statement of values as they relate to nonfinancial outcomes.

Sample Provisions 2

In making investment decisions for the assets of this Trust, I direct the Trustee to consider my strong devotion to sustainable investing during my lifetime, which I believe impacts the long-term risk adjusted performance of companies. I view consideration of ESG factors whether aligned with my articulated values to be both prudent and in the best interests of the beneficiaries.

The Trustee is expressly authorized to acquire and retain investments not regarded as traditional for trusts, including, without limitation, investments that integrate environmental, social and corporate governance (ESG) considerations, regardless of whether such ESG considerations and investments would otherwise be regarded as imprudent, improper, a violation of the duty of loyalty, or otherwise unlawful under [insert specific reference to state law]. Any applicable jurisdiction’s “prudent person” or “prudent investor” rule, duty of loyalty, or any other rule of applicable state law that would restrict the Trustee’s ability to take ESG considerations into account are expressly waived with respect to such investments. The Trustee has full discretion to engage in one or more sustainable, socially responsible or ESG investment strategies, in addition to, or in place of, other investment strategies. When making investment decisions, the Trustee may consider [my financial needs as well as my personal values, including] my desire that the Trustee engage in ESG investment strategies that align with my values or beliefs as evidenced by my own personal investments or those of the beneficiaries of any trust hereunder. In determining the values and beliefs of the beneficiaries, the Trustee may rely upon any written statement of values, including a family mission statement, however, no such written statement of values shall be required for the Trustee to integrate ESG factors into its investment decisions [To the extent that my expressed values and beliefs regarding sustainable investing conflict with those expressed by [the Primary Beneficiary] or [the beneficiaries who are at the time an investment decision is made are permitted distributees of current income or principal] or [who are in the most senior generation of current beneficiaries from time to time], I direct that the values and beliefs of the beneficiaries shall be given priority over my values and beliefs.

Section 03

Grantor Retained Annuity Trust (GRAT) Language Allowing Concentrations

In making investments, the Trustee is authorized to invest in and retain concentrated positions in any assets or asset classes even though such positions may be considered, and in fact may be, more volatile or risky than alternative investments available to the Trustee. The [State X] prudent investor rule is expressly waived and no duty to diversify shall apply to the Trustee. I direct the Trustee to take into consideration all other assets known to the Trustee to be owned by me or held in trust for my primary benefit, including without limitation any other grantor retained annuity trust of which I am the annuitant, for purposes of setting investment objectives, determining asset allocation, and evaluating the suitability of particular investments.

Section 04

Waiver of Duty to Diversify

[With the written consent of (i) the Grantor, if living, or (ii) if the Grantor is not then living, the Primary Beneficiary, or (iii) if the Primary Beneficiary is a minor or otherwise incapacitated or disabled, the guardian of, or if none, the parent, spouse, or adult child of such Primary Beneficiary, t][T]he Trustee of any trust created hereunder shall have the power to acquire and retain investments not regarded as traditional for trusts, including, without limitation, investments that would be forbidden or would be regarded as imprudent, improper or unlawful under any applicable jurisdiction’s “prudent person” or “prudent investor” rule, any rule or law concerning the duty of loyalty, any rule or law limiting, prescribing, or voiding or making voidable any interested party or self-dealing transaction, or any other rule or law which restricts a fiduciary’s capacity to invest.
Notwithstanding any duty otherwise existing hereunder or at law or in equity, in making investments the Trustee may disregard any or all of the following factors:
1. Whether a particular investment, or the trust investments collectively, will produce a reasonable rate of return or result in the preservation of principal.
2. Whether the acquisition or retention of a particular investment, or trust investments collectively, is consistent with the Trustee’s duty of impartiality. No duty of impartiality shall exist to the extent such duty would limit or preclude any exercise of the Trustee’s investment powers.
3. Whether the acquisition or retention of a particular investment or any aspect of the administration of such investment violates any duty of loyalty or rule against self-dealing. No duty of loyalty shall exist to the extent such duty would limit or preclude self-dealing transactions.
4. Whether the trust is diversified. No duty to diversify shall exist.
5. Whether any or all of the trust investments would traditionally be classified as too risky or speculative for trusts. The entire trust may be so invested. The Trustee [or other investment advisor designated in this trust agreement] shall have sole and absolute discretion in determining what constitutes acceptable risk and what constitutes proper investment strategy.
To the extent the Trustee is directed hereunder as to the exercise of investment powers, the party providing such direction (the “Investment Fiduciary”) shall have the authority to direct the Trustee to make any investment which the Trustee is authorized to make under this Section.
The purpose in granting the foregoing authority is to modify the “prudent person” rule, “prudent investor” rule, the application of statutory law or common law duties of loyalty, impartiality and diversification to the extent that such duties otherwise would limit investment powers, or any similar rule or law which restricts a fiduciary’s ability to invest insofar as any such rule or law would prohibit an investment or investments because of one or more factors listed above, or any other factor relating to the nature of the investment itself, and any such rule or law shall apply only to the extent that such law shall not be inconsistent with the broad investment provisions of this trust agreement.

Section 05

Grantor’s Investment Powers – Revocable Trust

Notwithstanding the general investment powers of the Trustee, while I am living and able to manage my affairs:

I shall have the power to direct the purchase, retention or sale of any trust assets and the purchase of property with any principal cash in the trust;
I shall have sole investment, [voting] and management responsibility (and the Trustee shall have no such responsibility) for the following assets in the trust:
1. All non-marketable assets in the trust, including tangible personal property, interests in real estate, partnerships, limited liability companies or closely held corporations, [insurance policies,] personal notes and mortgages;
2. Any marketable asset in the trust which I have designated as an asset for which I have investment responsibility; and
3. Any asset of the trust purchased, sold or retained at my direction.

If I have investment responsibility for an asset, the Trustee shall sell the asset, and deal with it, only upon my written direction. The Trustee shall be under no obligation to review the asset, make any investment recommendation with respect to it, solicit any direction from me, value the asset if it is non-marketable, or insure the asset. The Trustee shall exercise voting rights for interests in such asset only as directed by me. If the trust holds interests in real estate, the Trustee need not review or inspect the properties, except that the Trustee shall have the right (but not the duty) to exercise the Trustee’s environmental powers under this agreement.

Section 06

Retention and Acquisition of Special Assets

Version 1 – Retention of Special Assets

This Trust or any other trust created hereunder may hold, directly or indirectly through other entities, shares of stock or other evidence of interest in or indebtedness of _________________ , a [insert state of formation and entity type], and any entity or entities succeeding to the business of said [insert entity type] by consolidation, merger, purchase of assets, or otherwise (“XYZ interest”). Notwithstanding any other provisions of this trust agreement or applicable law to the contrary, the Trustee is directed to retain indefinitely any and all XYZ interests held in such trust without regard to whether or not such property is unproductive, underproductive, or a kind of property in which the Trustee may otherwise legally invest, and regardless of any rule of law concerning diversification. [Attorney to add descriptive explanation by the Grantor of reason(s) why the Grantor is directing the Trustee to retain the stock.]

The XYZ interest constitutes proper investment of trust principal, even though it may lack liquidity, may be considered, and in fact may be, more volatile or risky than alternative investments available to the Trustee, may never yield a dividend or the dividend may be diminished or terminated, may be a wasting asset, and may constitute a very large percentage or all of the principal of such trust. The prudent investor rule of applicable state law is expressly waived with respect to the XYZ interest, as is any duty to diversify the XYZ interest. To the extent the retention of the XYZ interest may be inconsistent with any duty of impartiality as to different beneficiaries of the trust, such duty shall not exist and is expressly waived even though investment in other assets might have resulted in more assets available for a particular beneficiary or class of beneficiaries, either in the short term or the long term.

The Trustee shall incur no liability whatsoever for retaining the XYZ interest pursuant to this Section, and the Trustee shall be indemnified, protected, and held harmless, from and against any and all losses, claims, demands, costs, damages, liabilities, expenses of any nature (including reasonable attorneys’ fees and costs), judgments, fines, settlements, and other amounts arising from or relating to, directly or indirectly, the indefinite retention of the XYZ interest. This indemnification shall be provided from and out of the assets of the trust and shall apply regardless of whether the Trustee is acting as a Trustee of such trust at the time any such loss, claim, demand, cost, damage, liability, expense, judgment, fine, settlement or other amount is asserted, paid or incurred.

Version 2 – Acquisition and Retention of Special Assets

A material purpose of this Trust is to permit concentrated and continued investment in __________________________ (“Special Assets”). Notwithstanding that Special Assets may constitute a large part or all of the principal of this Trust or any other trust created hereunder and such trust may therefore lack the diversification or productivity ordinarily considered prudent for trust investments and, notwithstanding the prudent investor rule of applicable state law or any other rule of trust law that would otherwise limit acquisition or retention of Special Assets, the Trustee is expressly authorized to acquire Special Assets and is expressly directed to retain any Special Assets that may from time to time be a part of the principal of such trust and to exercise any rights or options as to Special Assets. No Trustee shall be disqualified from holding office or accepting remuneration with respect to a business entity represented by Special Assets, or from purchasing or selling Special Assets or voting Special Assets in favor of the Trustee, regardless of the Trustee’s personal interest in the business entity represented by Special Assets or in the issue being voted on. The Trustee shall never be accountable or criticized for any loss sustained by reason of any action or inaction under this Section except as a result of such fiduciary’s personal bad faith or gross and willful negligence, and the Trustee shall be held harmless from any cost or liability as to such actions and inactions in the absence of such fiduciary’s personal bad faith or gross and willful negligence.

Section 07

Retention of Residence

If my spouse survives me, the following shall apply to each trust created hereunder that holds any interest in a Residence (as defined below) and of which my spouse is a permissible income beneficiary:

My spouse shall have the right to occupy and use each Residence, rent free, as long as my spouse desires to do so.
My spouse shall have responsibility (and the Trustee shall have no responsibility) for each Residence, including payment of maintenance, repair, and other expenses relating to the Residence, except that the Trustee shall pay all taxes, real estate and condominium assessments, insurance premiums and mortgage payments on the Residence. This section applies only while my spouse is not incapacitated.

While my spouse has responsibility for a Residence, the Trustee need not review or inspect the Residence, make any payments in connection with it except as provided above, or inquire whether my spouse is fulfilling that responsibility.

While my spouse has responsibility for a Residence, my spouse shall have the right to direct the Trustee to sell the Residence and also to reinvest part or all of the net sale proceeds in a replacement Residence selected by my spouse. My spouse may exercise these powers of direction only in a fiduciary capacity. My spouse shall have sole responsibility for the sale and reinvestment of any Residence pursuant to my spouse’s direction, including price and other terms and conditions. My spouse and the Trustee shall have the same rights and responsibilities with respect to a replacement Residence as they did, respectively, with respect to the replaced Residence. For purposes of this Section, the term “Residence” includes, without limitation, a house, a condominium, a cooperative apartment (including any shares of stock or proprietary leases relating to such apartment), a nursing home or retirement community arrangement, a beneficial interest in a land trust holding title to any of the foregoing, and a fractional interest in any of the foregoing, in each case regardless of whether such Residence is used as my spouse’s primary residence or as a seasonal or vacation residence.

The statement of the Trustee that it is acting according to this Section shall fully protect all persons dealing with the Trustee. The Trustee shall have no responsibility for any loss that may result from acting in accordance with this Section.

Section 08

Acquisition and Retention of Lifestyle Assets

Clients may want to hold “lifestyle assets” in trust for their use and enjoyment and for other reasons including privacy, facilitating payment of expenses or for governance of co-owned assets. In some cases, trustee may want to hold such assets in trust for a beneficiary’s use and enjoyment rather than making a discretionary distribution to a beneficiary to acquire lifestyle assets when the trustee determines that it would be in a beneficiary’s best interests not to own the asset in their individual name for creditor protection or to preserve assets for remainder beneficiaries or if a material purpose of the trust is to maintain legacy assets, such as a family cottage. For grantors who want to permit retention of lifestyle assets in trust or to allow trustees flexibility to acquire and maintain these assets for beneficiaries, consider the following language:

This Trust or any other trust created under this instrument may acquire, hold, directly or indirectly through entities¹, non-income producing and depreciating assets including art, collectibles, aircraft, automobiles, yachts, seasonal or vacation homes or any other asset used, occupied or enjoyed by a beneficiary ("lifestyle assets") upon such terms and for any purposes as determined by the Trustee.

The Trustee is authorized to pay all maintenance expenses, operating costs including employees, costs of improvement, repair, expansion and renewal, license fees, insurance, property or use taxes for lifestyle assets from the income or principal of any such trust in the Trustee’s sole discretion. Notwithstanding any other provisions of this trust agreement or applicable law to the contrary, the Trustee is authorized to acquire and retain indefinitely any and all lifestyle assets in trust without regard to whether or not such property is unproductive, underproductive, wasting or a kind of property in which the Trustee may otherwise legally invest and regardless of any rule of law concerning diversification or total return performance.

[Attorney to add descriptive explanation by the Grantor of reason(s) why the Grantor is permitting the Trustee to acquire or retain the lifestyle assets.] [The Trustee may acquire and retain lifestyle assets for beneficiaries’ use as an alternative to making distributions to a beneficiary or a beneficiary acquiring assets in a beneficiary’s individual name.]²

Notwithstanding the Prudent Investor Rule under applicable state law or any other provision of this instrument, lifestyle assets constitute proper investments of trust principal, even though they may lack liquidity, will be subject to depreciation and may be wasting assets and may constitute a large percentage or all of the principal of such trust. The prudent investor rule of applicable state law is expressly waived with respect to lifestyle assets, as is any duty to diversify lifestyle assets. To the extent the retention of lifestyle assets may be inconsistent with any duty of impartiality as to different beneficiaries of the trust, such duty shall not exist and is expressly waived even though investment in other assets might have resulted in more assets available for a particular beneficiary or class of beneficiaries, either in the short term or the long term.

The Trustee shall incur no liability whatsoever for retaining lifestyle assets pursuant to this Section, and the Trustee shall be indemnified, protected, and held harmless, from and against any and all losses, claims, demands, costs, damages, liabilities, expenses of any nature (including reasonable attorneys’ fees and costs), judgments, fines, settlements, and other amounts arising from or relating to, directly or indirectly, the acquisition of and indefinite retention of lifestyle assets. This indemnification shall be provided from and out of the assets of the trust and shall apply regardless of whether the Trustee is acting as a Trustee of such trust at the time any such loss, claim, demand, cost, damage, liability, expense, judgment, fine, settlement or other amount is asserted, paid or incurred.

Section 09

Payment of Expenses for Family Office or Private Trust Company

Many families choose to create family offices for multiple purposes including coordination of wealth planning among family members, management of assets or to sustain a family’s legacy through philanthropy or other shared activities. The family office may be structured as a private trust company and owned by one or more trusts or other entities, or will be owned by trusts upon the death of a grantor making specific authorization for a trustee to make distributions to maintain a family office desirable.

Expenses for Family Offices

I [own] [own an interest in] [have operated] [have engaged/contracted with/utilized] ___(insert name)_________(my “Family Office”), which provides [describe types] services to me [, members of my family, and certain trusts and businesses owned by or benefitting me and/or members of my family]. [I anticipate that my interest in my Family Office will pass upon my death to one or more trusts under this Agreement]. I believe that the continued operation of my Family Office [for X period of time] will provide a significant benefit to the trust beneficiaries. I therefore direct the Trustee to:

a. Retain any interest in my Family Office, and in any business or entity that succeeds to substantially all of the assets and operations of my Family Office as an asset of the trust] [as long as my Family Office is providing such services to such trust] [as directed from time to time by the Investment Advisor]

b. Pay [capital calls], expenses and operating costs, including employee compensation, rent, license fees, insurance, property taxes, etc., for my Family Office and any of its successors or assigns from the income or principal of any such trust that the Trustee in the Trustee’s sole discretion deems advisable for as long as my Family Office is [owned by or] providing services to any such trust [for X period of time, e.g. until settlement of the estate of the grantor].

My Family Office may, but is not required, to have a contract with any such trust which either allocates actual expenses or charges a fixed percentage of assets under administration among trusts and other entities. The Trustee has no duty to determine how expenses of my Family Office should be allocated among family trusts or entities and the Trustee can pay such expenses as directed by a representative of my Family Office.

The Trustee has no duty to review the structure or oversee the operations of my Family Office including whether it is registered with any state or other regulatory body. Notwithstanding any other provisions of this trust agreement or applicable law to the contrary, the Trustee is authorized to pay expenses and operating costs to my Family Office for administrative, legal, tax or other advisory services* without regard to whether such expenses would be considered a proper trust expense. The Trustee shall have no duty to review whether such expenses are commensurate with rates charged by other similar service providers. The Trustee shall never be accountable or criticized for its payment of such expenses under this Section and the Trustee shall be held harmless from any cost or liability as to such actions in the absence of such fiduciary’s personal bad faith or willful negligence.

Section 09

Special Assets Direction Advisor (Directed Trusts Provision)

Notwithstanding any other provision herein, in the case of Special Assets (as defined below), the Trustee [of each trust created hereunder] shall exercise the investment powers granted to it under this trust agreement only upon receiving the written direction of the Special Assets Direction Advisor of such trust. Any bank or trust company acting as a Trustee hereunder (sometimes hereinafter, the “Corporate Trustee”), including The Northern Trust Company, shall not, as Trustee, be authorized to make, nor shall it be responsible or liable for, decisions regarding the retention or disposition of Special Assets or any voting or other actions to be taken with respect to Special Assets. The Special Assets Direction Advisor at any time acting shall have the sole and exclusive authority, liability and responsibility hereunder with respect to Special Assets, including, but not limited to, investment decisions, which shall include the power to borrow and enter into loan agreements where Special Assets are pledged as collateral (the “Special Assets Investment Powers”), and the Corporate Trustee shall have no responsibility to the trust, any beneficiary or any other person for any action taken or any omission by or at the direction of the Special Assets Direction Advisor for so long as the Special Assets are assets of such trust. Any such written direction shall be in a form acceptable to the Trustee and, by providing such written direction, the Special Assets Direction Advisor shall be deemed to have certified to the Trustee that:
1. The actions directed to be taken by the Special Assets Direction Advisor are authorized by the trust agreement and applicable law,
2. The Special Assets Direction Advisor has considered and/or consulted with competent advisors regarding the potential consequences of such actions, including (but not limited to) federal and state tax consequences,
3. The implementation of such direction by the Trustee shall not cause the Trustee to incur any personal liability, or cause the Trustee to make any representation, warranty, covenant, agreement or other obligation in its individual capacity rather than as Trustee of the Trust,
4. The Trustee shall have no duty or responsibility to inquire into or examine whether the exercise of such power by the Special Assets Direction Advisor is authorized by the trust agreement or applicable law, and
5. The Special Assets Direction Advisor shall hold the Trustee harmless and indemnify the Trustee out of trust assets for any claims, losses, damages and costs (including reasonable attorneys’ fees) arising out of or relating to such direction.
“Special Assets” are (i) any assets designated as such by the Special Assets Direction Advisor; and (ii) any other assets designated as such by the Corporate Trustee, as to which the Corporate Trustee or any of its affiliates determines at any time that it is or might be inappropriate or inadvisable for the Trustee to accept, have discretion over, dispose of or otherwise control or act with respect to, provided that no such designation shall be deemed to be an exercise of the Corporate Trustee’s power, authority, control over or discretion with respect to such assets.
Notwithstanding any provision herein to the contrary, the Trustee shall have no duty or responsibility to inquire into or examine whether any actions directed to be taken by the Special Assets Direction Advisor are authorized by the trust agreement or applicable law or result in any adverse tax consequence to the trust, the Grantor(s) or any beneficiary, and the Trustee shall not be liable to any person, including any beneficiary, for any breach resulting from acting pursuant to the direction of the Special Assets Direction Advisor.
With regard to Special Assets, and in addition to the Special Assets Direction Advisor’s duties herein, the Special Assets Direction Advisor shall have the duty (i) to confirm to the Trustee, in writing, the value of any Special Assets at least annually and upon request by the Trustee, (ii) to manage or participate in the management of any entity constituting a Special Asset of the trust, to the extent such entity’s governing instruments or applicable law require or permit the trust to manage the same, (iii) to direct the Trustee with respect to making any representation, warranty or covenant required to be made in order to make and/or maintain any Special Asset and (iv) to direct and instruct the Trustee on the future actions, if any, to be taken with respect to such representations, warranties and covenants.
The initial Special Assets Direction Advisor shall be _______________________________ . During any period that The Northern Trust Company is the Corporate Trustee, the Special Assets Direction Advisor, if an individual, may not be a director, partner, employee, or spouse of a director, partner or employee of the Corporate Trustee or any of its affiliates or successors.
It is intended that a directed trust with respect to Special Assets be created and, in this regard, the Trustee shall have no duty to inquire into or monitor Special Assets or the directions of the Special Assets Direction Advisor, and, absent willful misconduct, shall not be liable for (i) any act or failure to act by the Special Assets Direction Advisor, (ii) acting or ceasing to act at the direction of the Special Assets Direction Advisor, or (iii) any loss resulting from any action taken or not taken by the Special Assets Direction Advisor, or taken by the Trustee in accordance with the direction of the Special Assets Direction Advisor.
The Trustee shall be protected to the fullest extent permitted by law and shall be liable only for its willful misconduct that has been established by clear and convincing evidence in the court then having primary jurisdiction over the trust. The Trustee shall have no liability hereunder to any trust beneficiary or any other person for the Trustee’s good faith reliance on the foregoing provisions or on any other provision herein concerning Special Assets.
The Special Assets Direction Advisor of each trust created hereunder shall be entitled to resign at any time by delivery of a separate writing to the then acting Trustee as well as to the Grantor or, if the Grantor is not then living, to the adult beneficiaries then eligible to receive distributions of income (whether discretionary or mandatory) from the trust (the “Adult Income Beneficiaries”) or, if none, to the parents or legal guardians of the minor beneficiaries then eligible to receive distributions of income (whether discretionary or mandatory) from the trust (the “Minor Income Beneficiaries”). The Special Assets Direction Advisor may also be removed, with or without cause, by the Grantor or, if the Grantor is incapable of acting, by a majority of the Adult Income Beneficiaries or, if none, by a majority of the Minor Income Beneficiaries, by written instrument delivered to the Special Assets Direction Advisor and the Trustee; provided, however, that no such removal shall be effective until a successor Special Assets Direction Advisor is appointed [pursuant to the following provisions of this Section] and accepts such appointment by written instrument delivered to the Trustee.
If, upon the resignation or removal, or unwillingness or inability to serve, of the Special Assets Direction Advisor, there is no successor Special Assets Direction Advisor willing and able to serve, the Grantor or, if the Grantor is incapable of acting, a majority of Adult Income Beneficiaries or, if none, a majority of Minor Income Beneficiaries shall have the right to appoint any person or persons (whether individual, corporate or other entity) in whatever number shall be determined to be appropriate, to serve as successor Special Assets Direction Advisor, by written instrument delivered to the Trustee and the Special Assets Direction Advisor so appointed.
If no successor Special Assets Direction Advisor has been appointed or has accepted its appointment in writing within thirty (30) days after the resignation or removal, or unwillingness or inability to serve, of the Special Assets Direction Advisor, then the Trustee may petition the court having jurisdiction over the trust to appoint a successor Special Assets Direction Advisor, and any costs relating to such petition shall be borne by the trust. During such time as there is no Special Assets Direction Advisor serving hereunder, the Trustee shall have no responsibility or duty to exercise any Special Assets Investment Power and shall not be held liable for any act or omission relating to the exercise or non-exercise of said Special Assets Investment Powers.
The Special Assets Direction Advisor shall exercise the Special Assets Direction Advisor’s functions in a fiduciary capacity and in a manner that the Special Assets Direction Advisor reasonably believes to be in accordance with the purposes of this trust agreement.

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Trustee PowersThe authority to fully serve beneficiaries' best interests

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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.

The Northern Trust Company Member, FDIC