Authority to Allocate Trustee Duties Among Multiple Trustees
By Robert V. A. Harra III, Gordon, Fournaris & Mammarella, P.A.
The bifurcation of trustee duties and powers is not a new concept in Delaware. Title 12 of the Delaware Code (“the Code”) has long recognised the ability for a governing trust instrument to restrict a trustee’s authority to dispose of or otherwise deal with specified trust assets.
If a governing instrument does not provide a bifurcated fiduciary structure, whether through the use of direction advisers or the complete bifurcation among co-trustees, interested parties often seek to modify a trust using tools available under Delaware law. Newly enacted Section 3343 of the Code provides yet another tool for trusts administered in, or otherwise governed by, Delaware law.
Section 3343(a) of the Code provides that “[t]he power to appoint a successor trustee under a governing instrument shall be deemed to include the power to appoint multiple successor trustees and additional trustees” and “[t]he power to appoint multiple successor trustees and additional trustees shall be deemed to include the power to allocate various trustee powers exclusively to one or some of the trustees serving from time to time”. Accordingly, unless a trust expressly provides otherwise, the person(s) with the power to appoint a successor trustee can now directly bifurcate and allocate trustee duties and powers among co-trustees without modifying a trust or involving other parties.
Section 3343(c) of the Code provides that, in accordance with Section 3313A of the Code, an appointed trustee to whom powers have been exclusively allocated, shall be a fiduciary only with respect to such allocated powers, and a trustee excluded from exercising powers shall have no liability for, nor any duty to monitor, the actions of a trustee to whom powers are so allocated. Otherwise, Section 3343(b) of the Code clarifies that all other general trustee provisions under a governing instrument (i.e., qualifications, indemnification, compensation, etc.) shall continue to apply to trustees.
The use of this new statute gives rise to a unique set of issues that must be carefully evaluated. However, it provides flexibility to trust management and has many practical uses.
Robert V. A. Harra IIIGGI member firm
Gordon, Fournaris & Mammarella, P.A.
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Wilmington (DE), USA
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Gordon, Fournaris & Mammarella, P.A. (GF&M) is a law firm located in Wilmington, Delaware, with primary areas of practice including trusts and estate planning, business planning and transactions, taxation, commercial real estate, corporate, commercial, civil and fiduciary litigation, and alternative dispute resolution (ADR).
Rob Harra is a director at GF&M, where his prac- tice focuses on federal transfer tax planning and the unique aspects of Delaware trust law. Rob’s practice also involves various aspects of business planning and transactions, including the issuance of legal opinions associated with Delaware entities.
Published: Trust & Estate Planning Newsletter, No. 04, Autumn 2019 l Photo: pabrady63 - stock.adobe.com