I. INTRODUCTION Financial institutions have faced a dilemma when dealing with trustees of trusts, be they living or testamentary trusts. Should the bank request and obtain a full copy of a trust agreement or should it only review the first and last pages of the trust instrument to avoid being placed “on notice” of restrictions or limitations on the powers of the trustee or the scope of the trust?
Certain provisions of Nebraska law provide protections to third parties dealing with a trustee. For example, a bank dealing with a trustee may assume, without inquiry, the existence of trust powers and their proper exercise by the trustee. Neither is a bank bound to inquire whether a trustee has power to act or is properly exercising such powers. Also, a bank need not assure the proper application of trust assets paid or delivered to the trustee. In addition, the Uniform Commercial Code (UCC) provides that in the case of a check payable to a trustee, a bank has “notice” of a breach of the trustee’s fiduciary duty if the check is:
A. Taken in payment of or as security for a personal debt of a trustee;
B. Taken in a transaction known to be for the personal benefit of the trustee; or
C. Deposit it in an account other than the trust account.
II. LEGISLATIVE PROTECTION ADOPTED
To address the uncertainty which exists in this area, state legislation has been enacted to provide additional protection to financial institutions dealing with trustees of trusts. The provisions of the Uniform Trust Code (UTC), Neb.Rev.Stat. §§ 30-38,102-107 allow a trustee voluntarily or upon the request of the person with whom he or she is dealing to present a “certification of trust,” that may contain the following facts or contain the following information:
A. The existence of a trust and, for an inter vivos trust, the date of execution or, for a testamentary trust, the date of death of the decedent;
B. The identity of the person who created the trust and each currently acting trustee;
C. The powers of the trustee and any restrictions imposed upon the trustee in dealing with the assets of the trust;
D. The name or method of choosing successor trustees;
E. Whether the trust is revocable or irrevocable and the identity of any person holding the power to revoke it;
F. If there is more than one trustee, whether all of the trustees must, or if less than all of the trustees may act to exercise identified powers of the trustee;
G. The identifying number of the trust and whether it is a social security number or an employer identification number;
H. The name of each beneficiary and the relationship to the person establishing the trust;
I. The state under which the trust was established; and
J. The form in which title to the assets of the trust is to be taken.
The “Certification of Trust” must contain a statement that the trust has not been revoked or amended to make any representations contained in the “Certification of Trust” incorrect and that the signatures are those of all the acting trustees. Although a “Certification of Trust” need not contain the dispositive provisions of the trust, the person to whom the “Certification of Trust” is presented may require copies of, or excerpts from, any trust instrument which designates the trustee or confers upon the trustee power to act in the transaction proposed by the trustee.
A person who acts in reliance upon the “Certification of Trust”, without any knowledge that the representations contained in the “Certification of Trust” are incorrect, is not liable to any person for such actions. A person who does not know that the representations contained in the “Certification of Trust” are incorrect may assume, without any inquiry, the existence of the representations contained in the “Certification of Trust”. Knowledge may not be inferred solely from the fact that a copy of all or a part of the trust instrument is held by the person relying upon the “Certification of Trust”.
A person’s failure to demand a “Certification of Trust” or his or her refusal to accept and rely solely on a “Certification of Trust”, does not constitute an improper act, and no inference as to whether such person has acted in good faith may be drawn from the failure to demand, or the refusal to accept and rely upon a “Certification of Trust”. The provisions of the UTC:
A. create no implication that a person is liable for acting in reliance upon a “Certification of Trust” under circumstances in which the requirements of §§ 30-38,102 to 30-38,107 are not satisfied;
B. authorizes a trustee to present a “Certification of Trust” to any person in lieu of a copy of any trust instrument to establish the existence or terms of the trust;
C. allows the trustee to present the “Certification of Trust” voluntarily, or at the request of the person with whom the trustee is dealing; and
D. does not require a person to accept and rely solely on a “Certification of Trust” in lieu of a copy of, or any excerpts from, the trust instrument itself.
The “Certification of Trust” must be in the form of an affidavit and must be signed and acknowledged by all acting trustees of the trust.
III. CONCLUSION AND SAMPLE FORMS
Since financial institutions are encountering trusts with increasing frequency, the law creates a “safe harbor” when dealing with trustees. Anytime a question arises when dealing with the trustee, you should endeavor to obtain a “Certification of Trust” from the trustee.
Following is a sample “Certification of Trust” form that may be utilized in dealing with a trustee.
CERTIFICATION OF TRUST
STATE OF NEBRASKA )
)SS:
COUNTY OF __________ )
The undersigned, constituting all of the trustees of the (Insert name of trust)
(“Trust,”) being first duly sworn, depose and say:
1. EXISTENCE OF TRUST. The trust is in existence and consists of:
(choose one)
An intervivos trust1 which was executed on (Insert date of intervivos trust)
or
A testamentary trust2, with the date of death of the decedent being
(insert date of death of decedent.)
2. IDENTITY OF GRANTOR, SETTLOR OR TESTATOR. The:
Grantor3
Settlor3
Testator4
of the trust is (Insert name of person who created trust)
3. CURRENTLY ACTING TRUSTEE(S). [Insert name of trustee(s)] is/are the currently acting trustee(s) of the trust.
4. POWERS OF TRUSTEE. Following or attached to this CERTIFICATION OF TRUST is a list of the powers of the trustee of the trust:
5. RESTRICTIONS IMPOSED UPON TRUSTEE. Following or attached to this CERTIFICATION OF TRUST is a list of the restrictions imposed upon the trustee of the trust in dealing with the assets of the trust:
6. A. NAME OF SUCCESSOR TRUSTEE(S). (Insert name of trustee(s)) is/are the successor trustee(s) of the trust.
B. METHOD OF CHOOSING SUCCESSOR TRUSTEE(S). Successor trustee(s) of trust are chosen as follows:
(Have the trustee(s) choose either option (a) or (b) in completing this portion of the CERTIFICATION OF TRUST)
7. REVOCABILITY/IRREVOCABILITY OF TRUST. The trust is:
Revocable
Irrevocable
and (Insert name(s) of any person with the power to revoke the trust)
holds the power to revoke said trust.
8. EXERCISE OF POWERS BY TRUSTEE(S).
All of the currently acting trustees must
Less than all of the currently acting trustees may
act to exercise identified powers of the trustee.
9. IDENTIFYING NUMBER. The tax identification number of the trust is:
Social Security Number:
Employer Identification Number:
10. BENEFICIARIES. Following is a list of beneficiaries of the trust and their relationship to the (Insert either grantor, settlor or testator)
Name of Beneficiary Relationship
11. ESTABLISHMENT OF TRUST. The trust was established in the State of (Insert state of establishment).
12. TITLE TO TRUST ASSETS. Title to assets of the trust is to be taken in the following form: (Insert the style in which the assets are to be titled, such as John Doe, Trustee of the John Doe Revocable Trust).
13. ACKNOWLEDGMENT. The trust has not been revoked or amended to make any representations in this CERTIFICATION OF TRUST incorrect and the trustee(s) signing this document is/are all of the acting trustees.
_________________________________________________, Trustee
SUBSCRIBED AND SWORN to before me on ________________________________.
(SEAL)
___________________________________________
Notary Public
My commission expires on __________________
1 An intervivos trust is a trust created by an individual during his or her lifetime pursuant to a trust agreement.
2 A testamentary trust is a trust established pursuant to the terms of an individuals Last Will and Testament.
3 A grantor/settlor is the individual who creates an intervivos trust.
4 A testator is a person who has executed a Last Will and Testament.