¶ 4401
Overview
Scope of the chapter. The trustee is the person who holds title to the trust property and carries the duties the law attaches to that title. The choice of trustee therefore shapes every other feature of a modern trust: how the property is invested, how discretionary distributions are made, which state's law governs administration, which state may tax the trust's income, and whether the property stays outside the settlor's and the beneficiaries' taxable estates. This chapter examines the trusteeship as an office with a beginning, a middle and an end. It covers the choice among individual, professional and institutional trustees; the federal tax limits on who may serve and who may remove and replace a trustee; the qualifications state law requires of a trustee whose presence anchors the trust's situs; acceptance, bond and the rules for cotrustees; compensation and its review by the court; resignation, vacancy and the succession of trustees; and removal by the court under section 706 of the Uniform Trust Code and the statutes modeled on it. The chapter closes with model provisions for the removal and replacement of trustees, compensation, resignation and successor appointment, and minimum qualifications.
What other chapters cover. Several related subjects are treated elsewhere and are cross-referred here. The directed-trust statutes, under which a trustee may be directed by an adviser or protector, are examined in chapters 6 through 10 (see supra chs. 6–10), and the liability of a directed trustee, including exculpation, indemnity and releases, in chapter 10 (see supra ¶ 1060). The protector's power to remove and replace trustees, and the tax framework for that power when the protector is related to the settlor, are examined in chapter 12 (see supra ¶ 1220). The succession, removal and deadlock of protectors and committees are examined in chapter 14 (see supra ch. 14), and the private trust company, which many families now use as trustee, in chapter 28 (see supra ch. 28). The movement of a trust's principal place of administration, which often follows a change of trustee, is examined in chapter 20 (see supra ch. 20). The mandatory rules of section 105(b) of the Uniform Trust Code, including the court's powers over bond and compensation that the terms of a trust cannot remove, are introduced in chapter 5 (see supra ¶ 510). Disputes over trustee conduct, and the arbitration, forum and no-contest clauses that govern them, are examined in chapter 45 (see infra ch. 45), and the full clause guide is in chapter 46 (see infra ch. 46).
Why the office deserves design. Most trust instruments name an initial trustee with care and then treat the rest of the office as boilerplate. In a trust expected to last for one generation that approach often works, because the settlor or the settlor's advisers can deal with a failed trustee while the settlor is alive. A trust designed to last for several generations will see many trustees. Individuals die, become incapacitated or lose interest. Corporate trustees merge, change their fee schedules, reassign trust officers and close regional offices. Beneficiaries move to other states and other countries. Each of these events tests the provisions on resignation, succession, removal and compensation, and an instrument that leaves those provisions to the default law hands the decision to a court applying a statute the settlor never read. The default rules of the Uniform Trust Code are serviceable, and much of this chapter explains them, but they are designed to fill gaps. A designed trust should not depend on them for its central governance.