Ethical Dilemmas in Trust and Estate Administration: No Good Deed Goes Unpunished

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1 Ethical Dilemmas in Trust and Estate Administration: No Good Deed Goes Unpunished Presented by: Joanne E. Hindel Regional Fiduciary Executive Fifth Third Bank Cleveland, Ohio And Katerina E. Mills Private Bank Legal Counsel Fifth Third Bank Cincinnati, Ohio At: The Midwest Trust and Wealth Management Conference October 9, 2013 The Inn at St. Johns; Plymouth, Michigan 1

2 I. Ethical issues versus fiduciary standards a. Trustees are not bound by the ABA Model Rules of Professional Conduct Client-Lawyer Relationship 1 Rule 1.4: Communication Rule 1.6: Confidentiality of Information Rule 1.7: Conflict of Interest: Current clients Rule 1.14: Client with Diminished Capacity b. State laws that set forth fiduciary standards i. Ohio Ohio Trust Code: O.R.C Duty of Trustee Generally Upon acceptance of a trusteeship, the trustee shall administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with Chapters to of the Revised Code. O.R.C (A) Duty of Loyalty to Beneficiaries A trustee shall administer the trust solely in the interests of the beneficiaries. O.R.C Multiple Beneficiaries Duty of Impartiality If a trust has two or more beneficiaries, the trustee shall act impartially in investing, managing, and distributing the trust property, giving due regard to the beneficiaries' respective interests. O.R.C Duty to Act as Prudent Person 1 See Attachment A: Model Rules. 2

3 A trustee shall administer the trust as a prudent person would and shall consider the purposes, terms, distributional requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution. ii. Michigan Michigan Trust Code: MCL : Administration of trust; duties of trustee Upon acceptance of a trusteeship, the trustee shall administer the trust in good faith, expeditiously, in accordance with its terms and purposes, for the benefit of the trust beneficiaries, and in accordance with this article. MCL (1): Duty of loyalty A trustee shall administer the trust solely in the interests of the trust beneficiaries. MCL : investor rule Impartiality; use of standards of Michigan prudent The trustee shall act as would a prudent person in dealing with the property of another, including following the standards of the Michigan prudent investor rule. If the trustee has special skills or is named trustee on the basis of representation of special skills or expertise, the trustee is under a duty to use those skills. iii. Illinois No statutes specific to general trustee duties, duty of loyalty or a duty to treat trust beneficiaries impartially. iv. Indiana Indiana Trust Code: IC (a) Duties of trustee The trustee has a duty to administer a trust according to its terms. IC Trust managed in interest of beneficiaries A trustee shall invest and manage the trust assets solely in the interest of the beneficiaries. 3

4 IC Impartial management If a trust has at least two (2) beneficiaries, the trustee shall act impartially in investing and managing the trust assets, taking into account any differing interests of the beneficiaries. c. Restatement of the Law Third Restatement (Third) of Trusts Section 78 Duty of Loyalty (1) Except as otherwise provided in the terms of the trust, a trustee has a duty to administer the trust solely in the interest of the beneficiaries, or solely in furtherance of its charitable purpose. (2) Except in discrete circumstances, the trustee is strictly prohibited from engaging in transactions that involve selfdealing or that otherwise involve or create a conflict between the trustee s fiduciary duties and personal interests. (3) Whether acting in a fiduciary or personal capacity, a trustee has a duty in dealing with a beneficiary to deal fairly and to communicate to the beneficiary all material facts the trustee knows or should know in connection with the matter. Restatement (Third) of Trusts Section 79 Duty of Impartiality; Income Productivity A trustee has a duty to administer the trust in a manner that is impartial with respect to the various beneficiaries of the trust, requiring that: (a) In investing, protecting, and distributing the trust estate, and in other administrative functions, the trustee must act impartially and with due regard for the diverse beneficial interests created by the terms of the trust; and (b) In consulting and otherwise communicating with beneficiaries, the trustee must proceed in the manner that fairly reflects the diversity of their concerns and beneficial interests. 4

5 II. Trustee interaction with settlors a. Revocable trusts and the diminished capacity settlor i. Family members who want to assist settlor I just want to help my wife Gertrude establishes a revocable trust and hires the Bank to serve as her trustee. As she gets older, she starts to suffer from dementia and her husband, Georg, who is her Agent under a durable power of attorney, contacts the Bank to withdraw funds from Gertrude s trust. - Can Georg stand in Gertrude s shoes and direct the trustee? - What, if any documentation is required? - Can the trustee act without proper authority from Gertrude? Pertinent statutes: - Ohio (E) 2 - Michigan (5) 3 - Illinois- 755 ILCS 45/ Indiana (e); ii. Family members who want to take advantage of settlor I will make you rich Imogene establishes a revocable trust and hires the Bank to serve as her trustee. Her daughter, Helena marries Ignasias, a self-styled investment guru. One day, Ignasias calls with Imogene on the phone and directs the trustee to transfer 50% of the trust to another account that Iggy will manage for Imogene. The trust officer gets verbal confirmation from Imogene and recognizes her voice. The trust officer is concerned however that Iggy is pressuring Imogene who cannot say no. - What can the trust officer do if the settlor has authorized the transaction? - Do trust terms or statutes allow a trustee to intervene? 2 See Attachment B for relevant Ohio Statutes referenced in Sections II a.- V a. of the outline. 3 See Attachment C for relevant Michigan Statutes referenced in Section II a. V. 1. Of the outline. 4 See Attachment D for relevant Illinois Statutes referenced in Sections II a. V. 1. Of the outline. 5 See Attachment E for all Indiana Statutes referenced in Sections II a. V. 1. Of the outline. 5

6 - Should the trustee inform remainder beneficiaries (the children of the settlor)? Pertinent statutes: - Ohio (A) - Michigan (1) and (2) - Illinois- 760 ILCS 5/11(a) - Indiana b. Irrevocable trusts that the settlor wants to control It s my money! Arturo establishes an irrevocable trust for the benefit of his children and grandchildren. Periodically, Arturo offers advice regarding the investments although he has not retained any authority over investments in the trust terms. He further insists that the trustee not provide statements to his grandchildren. Instead, he asks that those statements be sent to him only. - How should the trustee handle the advice from the settlor? - How should the trustee handle the request to deny statements to some of the current beneficiaries? - Are there state laws that address these issues? - Does it make a difference if the settlor has many other accounts with the trustee and control over trustee removal? Pertinent statutes: - Ohio (C); (C); Michigan (3) and (4) - Illinois- 760 ILCS 5/11(a) - Indiana ; (7); III. Trustee interaction with co-fiduciaries a. The co-fiduciary who is also a beneficiary A really good deal Mary sets up a trust for the benefit of her son, Xavier. She names the Bank and her son, Xavier, as co-trustees. The trust is to be held for the life of Xavier and is distributable at his death to his living lineal descendants. He has no children at the present time. The trust terms allow for distributions for Xavier s best interests and general welfare. Mary also provides that the trustee is to assist the beneficiary in developing the skills of prudent asset management. Xavier writes to the Bank seeking a distribution of 50% of the trust in order to start a business that will purchase and sell collectible cars. Bank officers are familiar with Xavier s proposed business partners and know that they are not 6

7 reputable. Xavier is adamant that the Bank agree to the distribution or alternatively, dissent as a co-trustee but still give him the funds. - How should the Bank document that the request is from both the beneficiary and the co-trustee? - If the trust terms do not address disagreements among cotrustees, how should the Bank handle the request if it wishes to deny it? - Should or can the Bank advise Xavier about the reputation of the proposed business partners? - How or should the Bank consider interests of remainder beneficiaries who are not yet identified? Pertinent statutes: - Ohio ; (B) - Michigan ; (2) - Illinois- 760 ILCS 5/10 - Indiana ; b. The co-fiduciary who seeks self-interested advantage My Dad would want me to have the money Simon is the son of the founder of Mom s Soul Food and a 75% owner in the business. Along with the Bank, he is also the co-trustee of a trust established by his father that was established to benefit him and his living lineal descendants. He has two minor children. The trust terms provide for distributions of income and principal to or for the benefit of the primary beneficiary (Simon) and his descendants as the trustee deems appropriate, taking into consideration the potential needs, best interests and welfare of the beneficiaries. Simon asks the Bank to distribute the entire trust to him in order for him to pay off a loan his company obtained from another lender. He claims that the company will have to file for bankruptcy if the loan is not repaid and he will be without means to support his family. - Should the bank consider the interests of Simon to be synonymous with the interests of his two minor children? - What if Simon divorces and his children live with his ex-wife? - Does it make a difference that the funds will be used to pay off a loan of Simon s company but not his personal loan? - Are there any statutes that address the duty of a co-trustee to fulfill his support obligations? Pertinent statutes: - Ohio ; (B) - Michigan (2) - Illinois- 760 ILCS 5/16.1(d) 7

8 - Indiana ; IV. Trustee interaction with beneficiaries a. How to remain impartial when dealing with multiple beneficiaries She is a no good mother Verna establishes a trust that divides into 5 shares at her death. Each share is held for the benefit of each of her five children and each child serves as cotrustee with the Bank for his/her respective share. Molly s share is held for the benefit of Molly and her husband as well as her daughter, Janet and Janet s two minor children. The trust terms provide for distributions of income and/or principal as the trustees deem desirable, taking into consideration the potential beneficiary s needs, best interests and welfare. The trustees are to consider the beneficiary s ability to conserve, manage and employ property and money usefully and prudently and all other factors that the trustees deem pertinent. The distributions can be in unequal amounts and may exclude members of the class to be benefited. Janet has been charged with trafficking in drugs and wants the Bank to provide her with funds to pay the costs of a lawyer to defend her against the charges. Her mother, Molly, is estranged from Janet and refuses to approve the distribution of funds and tells the Bank to deny the request. Further, Molly wants the bank to provide funds to her so that she can hire a lawyer to acquire custody of her two minor grandchildren. - Can Molly as co-trustee block the distribution of funds to Janet and compel the distribution of funds to herself? - How does the Bank address Molly s request for funds that will adversely affect the interests of another trust beneficiary, Janet? - How does the Bank trustee address estrangement between two beneficiaries who share equally in access to the same trust and who both get statements showing all transactions (and distributions to all beneficiaries)? Pertinent statutes: - Ohio ; (B) - Michigan (2) - Illinois- 760 ILCS 5/10; 760 ILCS 5/ Indiana ; b. How to demonstrate partiality for a primary beneficiary One hot mamma Jonathon was married for 35 years to Shirley who died 5 years ago. Last year, Jonathon married his maid Jaylo, who is 25 years younger than him and during a 8

9 blissful moment, died of a sudden heart attack. His trust, amended and restated shortly after his marriage to Jaylo, provides that his widow and his two daughters, Dianne and Christina (both adults in their late 20s) are the life beneficiaries of his trust but he directs the Bank, as trustee, to give preferential treatment and consideration to Jaylo. The three trust beneficiaries do not get along and Jonathon s two daughters often question distributions being made to Jaylo. Recently, Jaylo asked the trustee to distribute approximately 25% of the trust to her so that she can maintain the standard of living she claims she enjoyed while Jonathon was alive. - Is there any possibility of dividing trust assets among the three beneficiaries? - Should the trustee seek a court interpretation of the preferential treatment that the settlor intended in the trust terms? - Would the situation be more complicated if all 3 beneficiaries had additional accounts with the Bank? Pertinent statutes: - Ohio (C)(2); (A) (B); Michigan (3)(a); (1)(2); Illinois 760 ILCS 5/ Indiana ; ; c. How to balance the duty to keep all beneficiaries informed with confidentiality considerations Please don t tell my sisters and brothers Steve established a trust for the benefit of his five adult children. The trust is to be administered as a pot trust so that the Bank, as trustee, has the ability to make unequal distributions of trust funds to the beneficiaries based upon their needs and other resources. Steve s two sons are self-sufficient and two of his three daughters have married well and maintain comfortable life styles. But Steve s youngest daughter, Elena, married a no-good cad, Mark, who has squandered the family fortune. Elena has asked the trustee for funds to cover Mark s gambling debts but does not want her siblings to know about her personal situation. If the trustee approves the distribution, the funds distributed to Elena will be reflected on the next trust statement. - If all the trust beneficiaries are receiving statements and one of them questions the payment to Elena, how much information must the trustee reveal? - What if a beneficiary asks for documentation to support the debts owed by Elena and her cad husband? Does the trustee have an obligation to provide that information to another beneficiary? - Would it make a difference if Elena had entered into a confidential repayment arrangement with creditors? 9

10 Pertinent statutes: - Ohio (A) - Michigan (1) - Illinois-760 llcs 5/11(a) - Indiana V. Trustee interaction with its own subsidiaries (internal partners) a. Entering into transactions with affiliates Have I got a deal for you The Bank is administering a trust established by Sadie for the benefit of her surviving spouse, Jack and their two minor children. Phil, an insurance advisor at the Bank, convinces Jack that he should purchase life insurance on his life that will benefit his two children when he dies. He suggests that the trust could pay for the insurance premiums and he indicates that he can get a good deal for Jack if the insurance is purchased through him since he works for the same Bank. - What should the trust officer review in connection with this suggestion? - Can the bank, as trustee, consider the purchase of insurance through its own insurance advisor or subsidiary insurance company? - If the purchase is contemplated, who should be informed and what information should be distributed? Pertinent statutes: - Ohio Michigan Illinois- no IL statute on point, but nothing to prevent trustee as long as there is informed consent. - Indiana ;

11 ATTACHMENT A Model Rules Rule 1.4: Communication. (a) A lawyer shall: (1) promptly inform the client of any decision or circumstance with respect to which the client's informed consent, as defined in Rule 1.0(e), is required by these Rules; (2) reasonably consult with the client about the means by which the client's objectives are to be accomplished; (3) keep the client reasonably informed about the status of the matter; (4) promptly comply with reasonable requests for information; and (5) consult with the client about any relevant limitation on the lawyer's conduct when the lawyer knows that the client expects assistance not permitted by the Rules of Professional Conduct or other law. (b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation. Rule 1.6: Confidentiality of Information. (a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b). Rule 1.7: Conflict of Interest: Current clients. (a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: (1) the representation of one client will be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer. (b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) each affected client gives informed consent, confirmed in writing. Rule 1.14: Client with Diminished Capacity. (a) When a client's capacity to make adequately considered decisions in connection with a representation is diminished, whether because of minority, mental impairment or for some other reason, the lawyer shall, as far as reasonably possible, maintain a normal client-lawyer relationship with the client. (b) When the lawyer reasonably believes that the client has diminished capacity, is at risk of substantial physical, financial or other harm unless action is taken and cannot adequately act in the client's own interest, the lawyer may take reasonably necessary protective action, including consulting with individuals or entities that have the ability to take action to protect the client and, in appropriate cases, seeking the appointment of a guardian ad litem, conservator or guardian. (c) Information relating to the representation of a client with diminished capacity is protected by Rule 1.6. When taking protective action pursuant to paragraph (b), the lawyer is impliedly authorized under Rule 1.6(a) to reveal information about the client, but only to the extent reasonably necessary to protect the client's interests. 11

12 ATTACHMENT B OHIO Revocation or amendment of trust. (E) An agent under a power of attorney may exercise a settlor's powers with respect to revocation, amendment, or distribution of trust property only to the extent expressly authorized by both the terms of the trust and the power Revocation or amendment of trust. (A) During the lifetime of the settlor of a revocable trust, whether or not the settlor has capacity to revoke the trust, the rights of the beneficiaries are subject to the control of the settlor, and the duties of the trustee, including the duties to inform and report under section of the Revised Code, are owed exclusively to the settlor. If the trustee breaches its duty during the lifetime of the settlor, any recovery obtained from the trustee after the settlor becomes incapacitated or dies shall be apportioned by the court. If the settlor is living when the recovery is obtained, the court shall apportion the recovery between the settlor and the trust, or allocate the entire recovery to the settlor or the trust, as it determines to be equitable under the circumstances. If the settlor is not living when the recovery is obtained, the court shall apportion the recovery between the settlor's estate and the trust, or allocate the entire recovery to the settlor's estate or the trust, as it determines to be equitable under the circumstances Keeping beneficiaries informed - requests - required reports. (C) A trustee of a trust that has a fiscal year ending on or after January 1, 2007, shall send to the current beneficiaries, and to other beneficiaries who request it, at least annually and at the termination of the trust, a report of the trust property, liabilities, receipts, and disbursements, including the source and amount of the trustee's compensation, a listing of the trust assets, and, if feasible, the trust assets' respective market values. Upon a vacancy in a trusteeship, unless a cotrustee remains in office, a report for the period during which the former trustee served must be sent to the current beneficiaries by the former trustee. A personal representative or guardian may send the current beneficiaries a report on behalf of a deceased or incapacitated trustee Trustee powers, duties, and relations - beneficiaries' rights. (C) With respect to one or more of the current beneficiaries, the settlor, in the trust instrument, may waive or modify the duties of the trustee described in divisions (B)(8) and (9) of this section. The waiver or modification may be made only by the settlor designating in the trust instrument one or more beneficiary surrogates to receive any notices, information, or reports otherwise required under those divisions to be provided to the current beneficiaries. If the settlor makes a waiver or modification pursuant to this division, the trustee shall provide the notices, information, and reports to the beneficiary surrogate or surrogates in lieu of providing them to the current beneficiaries. The beneficiary surrogate or surrogates shall act in good faith to protect the interests of the current beneficiaries for whom the notices, information, or reports are received. A waiver or modification made under this division shall be effective for so long as the beneficiary surrogate or surrogates, or their successor or successors designated in accordance with the terms of the trust instrument, act in that capacity Administrative duties and responsibilities of trust; exclusion of fiduciaries. (A) As used in this section, "fiduciary" means a trustee under any testamentary, inter vivos, or other trust, an executor or administrator, or any other person who is acting in a fiduciary capacity for any person, trust, or estate. (B) If an instrument or other applicable written agreement describes, appoints, or directs a fiduciary to handle only the administrative duties and responsibilities of a trust, that administrative fiduciary shall not have any duties, responsibilities, or liabilities to the trust beneficiaries or to other persons interested in a trust except for those administrative duties and responsibilities specifically described in the instrument or written agreement. The administrative duties and responsibilities of a trust under this division may include any of the following: (1) Opening and maintaining bank, brokerage, financial, or other custodial accounts to receive trust income or contributions and from which trust expenditures, bills, and distributions may be disbursed; (2) Maintaining and handling trust records, reports, correspondence, or communications; 12

13 (3) Maintaining an office for trust business; (4) Filing any trust tax returns; (5) Employing agents in connection with the fiduciary's administrative duties; (6) Taking custody of or storing trust property; (7) Any other similar administrative duties for the trust. (C) If an instrument under which a fiduciary acts reserves to the grantor, or vests in an advisory or investment committee or in one or more other persons, including one or more fiduciaries, to the exclusion of the fiduciary or of one or more of several fiduciaries, any power, including, but not limited to, the authority to direct the acquisition, disposition, or retention of any investment or the power to authorize any act that an excluded fiduciary may propose, any excluded fiduciary is not liable, either individually or as a fiduciary, for either of the following: (1) Any loss that results from compliance with an authorized direction of the grantor, committee, person, or persons; (2) Any loss that results from a failure to take any action proposed by an excluded fiduciary that requires a prior authorization of the grantor, committee, person, or persons if that excluded fiduciary timely sought but failed to obtain that authorization. (D) Any administrative fiduciary as described in division (B) of this section or any excluded fiduciary as described in division (C) of this section is relieved from any obligation to perform investment reviews and make recommendations with respect to any investments to the extent the grantor, an advisory or investment committee, or one or more other persons have authority to direct the acquisition, disposition, or retention of any investment. (E) This section does not apply to the extent that the instrument under which an administrative fiduciary as described in division (B) of this section or an excluded fiduciary as described in division (C) of this section contains provisions that are inconsistent with this section Cotrustees - delegation - liability. (A) If there are three or more cotrustees serving, the cotrustees may act by majority decision. (B) If a vacancy occurs in a cotrusteeship, the remaining cotrustees may act for the trust. (C) A cotrustee must participate in the performance of a trustee's function unless the cotrustee is unavailable to perform the function because of absence, illness, disqualification under other law, or other temporary incapacity or the cotrustee has properly delegated the performance of the function to another trustee. (D) If a cotrustee is unavailable to perform duties because of absence, illness, disqualification under other law, or other temporary incapacity and prompt action is necessary to achieve the purposes of the trust or to avoid injury to the trust property, the remaining cotrustee or a majority of the remaining cotrustees may act for the trust. (E) A trustee may delegate to a cotrustee duties and powers that a prudent trustee of comparable skills could properly delegate under the circumstances. A delegation made under this division shall be governed by section of the Revised Code. Unless a delegation was irrevocable, a trustee may revoke a delegation previously made. (F) Except as otherwise provided in division (G) of this section, and subject to divisions (C) and (E) of this section, a trustee who does not join in an action of another trustee is not liable for the action. (G) Except as otherwise provided in this division, each trustee shall exercise reasonable care to prevent a cotrustee from committing a serious breach of trust and to compel a cotrustee to redress a serious breach of trust. A trustee is not required to exercise reasonable care of that nature under this division, and a trustee is not liable for resulting losses, when section of the Revised Code is applicable or there is more than one other trustee and the other trustees act by majority vote. (H) A dissenting trustee who joins in an action at the direction of the majority of the trustees and who notified any cotrustee of the dissent at or before the time of the action is not liable for the action Judicial standard of review for discretionary trusts. (B) Subject to division (D) of this section, and unless the terms of the trust expressly indicate that a rule in this division does not apply: 13

14 (1) A person other than a settlor who is a beneficiary and trustee of a trust that confers on the trustee a power to make discretionary distributions to or for the trustee's personal benefit may exercise the power only in accordance with an ascertainable standard. (2) A trustee may not exercise a power to make discretionary distributions to satisfy a legal obligation of support that the trustee personally owes another person Multiple beneficiaries - duty of impartiality. If a trust has two or more beneficiaries, the trustee shall act impartially in investing, managing, and distributing the trust property, giving due regard to the beneficiaries' respective interests Agreement among interested parties regarding trust matters. (C)(2) Resolving disputes arising out of the administration or distribution under the terms of the trust, including disputes over the construction of the language of the trust instrument or construction of the language of other writings that affect the terms of the trust; Judicial action due to change of circumstances. (A) The court may modify the administrative or dispositive terms of a trust or terminate the trust if because of circumstances not anticipated by the settlor modification or termination will further the purposes of the trust. To the extent practicable, the court shall make the modification in accordance with the settlor's probable intention Judicial action due to change of circumstances. (B) The court may modify the administrative terms of a trust if continuation of the trust on its existing terms would be impracticable or impair the trust's administration Combination or division of trusts. After notice to the qualified beneficiaries, a trustee may combine two or more trusts into a single trust or divide a trust into two or more separate trusts if the result does not substantially impair the rights of any beneficiary or have a materially adverse effect on the achievement of the purposes of the trust Keeping beneficiaries informed - requests - required reports. (A) A trustee shall keep the current beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests. Unless unreasonable under the circumstances, a trustee shall promptly respond to a beneficiary's request for information related to the administration of the trust Duties of trustee generally. Upon acceptance of a trusteeship, the trustee shall administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with Chapters to of the Revised Code Purchase of services or products. (A) A trust company acting in any fiduciary capacity, including, but not limited to, the capacities described in section of the Revised Code, may purchase any service or product, including, but not limited to, insurance or securities underwritten or otherwise distributed by the trust company or by an affiliate, through or directly from the trust company or an affiliate or from a syndicate or selling group that includes the trust company or an affiliate, provided that the purchase is otherwise prudent under the Ohio Uniform Prudent Investor Act and the compensation for the service or product is reasonable and is not prohibited by the instrument governing the fiduciary relationship. The compensation for the service or product may be in addition to the compensation that the trust company is otherwise entitled to receive from the fiduciary account. (B) A trust company shall disclose at least annually any purchase authorized by this section that was made by the trust company during that reporting period. The disclosure shall be given, in writing or electronically, to all persons entitled to receive statements of account activity, and shall include any capacities in which the trust company or an affiliate acts for the issuer of the securities or the provider of the products or services and the fact that the trust company or an affiliate may have an interest in the products or services. (C) This section shall apply to the purchase of securities made at the time of the initial offering of the securities or at any time thereafter. 14

15 ATTACHMENT C Michigan Statutes Revocation or amendment of revocable trust. (5) A settlor's powers with respect to revocation, amendment, or distribution of trust property may be exercised by an agent under a durable power of attorney only to the extent expressly authorized by the terms of the trust or the power of attorney Powers of settlor; exceptions; settlor as incapacitated individual; powers of withdrawal; actions by predecessor trustee. (1) Subject to subsection (2), while a trust is revocable, rights of the trust beneficiaries are subject to the control of, and the duties of the trustee are owed exclusively to, the settlor. This subsection does not apply to either of the following: (a) A trust created by the exercise of a power described in section 7820a. (b) A trust created by the exercise of a power of appointment held by a trustee in a fiduciary capacity Powers of settlor; exceptions; settlor as incapacitated individual; powers of withdrawal; actions by predecessor trustee. (2) If the trustee reasonably believes that the settlor of a revocable trust is an incapacitated individual, the trustee shall keep the settlor's designated agent or, if there is no designated agent or if the sole agent is a trustee, each beneficiary who, if the settlor were then deceased, would be a qualified trust beneficiary informed of the existence of the trust and reasonably informed of its administration Duty to inform and report. (3) A trustee shall send to the distributees or permissible distributees of trust income or principal, and to other qualified or nonqualified trust beneficiaries who request it, at least annually and at the termination of the trust, a report of the trust property, liabilities, receipts, and disbursements, including the source and amount of the trustee's compensation, a listing of the trust property and, if feasible, their respective market values, and, if applicable, any disclosure required under section 7802(5). In the trustee's discretion, the trustee may provide the report to any trust beneficiary. Upon a vacancy in a trusteeship, unless a cotrustee remains in office, a report shall be sent to the qualified trust beneficiaries by the former trustee. A personal representative, conservator, or guardian may send the qualified trust beneficiaries a report on behalf of a deceased or incapacitated trustee Duty to inform and report. (4) If the terms of a trust direct that accounts and information be provided to less than all qualified trust beneficiaries, at the court's direction, the trustee shall provide statements of account and other information to persons excluded under the terms of the trust to the extent and in the manner the court directs Cotrustees; powers and duties. (1) Cotrustees shall act by majority decision Discretionary powers; abuse; liability to beneficiary; rules; effect of limited or prohibited powers; exceptions. (2) Unless the trust instrument expressly provides otherwise, a trustee is not liable to a beneficiary for failure to exercise the power described in section 7820a or the power described in section 5a of the powers of appointment act of 1967, 1967 PA 224, MCL a Nonjudicial settlement agreement. (3) Matters that may be resolved by a nonjudicial settlement agreement include any of the following :(a) The interpretation or construction of the terms of the trust Modification or termination of trust; unanticipated circumstances or inability to administer effectively. (1) The court may modify the administrative terms of a trust if continuation of the trust on its existing terms would be impracticable or wasteful or impair the trust's administration. 15

16 Modification or termination of trust; unanticipated circumstances or inability to administer effectively. (2) The court may modify the administrative or dispositive terms of a trust or terminate the trust if, because of circumstances not anticipated by the settlor, modification or termination will further the settlor's stated purpose or, if there is no stated purpose, the settlor's probable intention Division or consolidation of trusts. (1) After notice to the qualified trust beneficiaries and to the holders of powers of appointment, a trustee may divide trust property into 2 or more separate portions or trusts and allocate property between them if the trusts have substantially identical terms and conditions or if the result does not impair rights of any beneficiary or adversely affect achievement of the purposes of the trust. (2) After notice to the qualified trust beneficiaries and to the holders of powers of appointment, a trustee may consolidate 2 or more trusts and administer them as 1 trust if the trusts have substantially identical terms and conditions or if the result does not impair rights of any beneficiary or adversely affect achievement of the purposes of the trust. If the rule against perpetuities speaks from different dates with reference to the trusts or if there are other variations in terms, consolidation may still take place, but the property of the trusts shall be maintained in separate accounts if necessary to recognize and give effect to the differences Duty to inform and report. (1) A trustee shall keep the qualified trust beneficiaries reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests. Unless unreasonable under the circumstances, a trustee shall promptly respond to a trust beneficiary's request for information related to the administration of the trust Administration of trust; duties of trustee. Upon acceptance of a trusteeship, the trustee shall administer the trust in good faith, expeditiously, in accordance with its terms and purposes, for the benefit of the trust beneficiaries, and in accordance with this article Investment of trust funds or property; "registered investment company" defined; bank considered as fiduciary. (1) A bank shall invest any money or property held by the bank as fiduciary and available for investment at the time and in the manner specified in the agreement, instrument, or order creating or defining the trust or other capacity in which the bank is acting or, if the bank holds the money or property as agent, as directed or permitted by the bank's principal. In the absence of investment specifications or limitations in the agreement, instrument, or order, the bank shall invest any money or property held by the bank as fiduciary within a reasonable time in real or personal property, of whatever type or nature, that a prudent investor would purchase, taking into account the purposes, terms, and distribution requirements expressed in the governing instrument, in the exercise of reasonable care, skill, and caution under conditions existing at the time of purchase. A bank's compliance with the prudent investor rule described in this subsection is determined in light of the facts and circumstances that exist at the time of the bank's decision or action as a fiduciary and requires a standard of conduct, not outcome or performance. (2) A bank shall not invest any money or property held as fiduciary in any securities or other properties, real or personal, purchased from the bank in its individual capacity or from any affiliate of the bank unless 1 of the following applies: (a) The investment is otherwise permitted by law, a court order, or the agreement, instrument, or order that creates or defines the trust or other fiduciary capacity in which the bank is acting. (b) All interested parties or their representatives consent to the investment. (c) The bank holds the money or property as an agent and the bank's principal directs or permits the investment. (3) Except when the agreement, instrument, or order creating or defining the trust or other capacity in which the bank, or the bank and 1 or more cofiduciaries, is acting prohibits the investment or transaction, a bank or a bank and 1 or more cofiduciaries may do any of the following with any money or property over which the bank or the bank and 1 or more cofiduciaries exercises investment discretion: 16

17 (a) Invest the money or property in a registered investment company even though either or both of the following apply: (i) The bank or 1 or more affiliates of the bank provide services as investment adviser, sponsor, distributor, manager, custodian, transfer agent, registrar, or otherwise, to the investment company and receives reasonable remuneration for those services. (ii) The bank as fiduciary owns or controls a majority of the voting shares of the investment company or a majority of the shares voted for the election of its directors or trustees or the bank as fiduciary otherwise controls the election of a majority of the investment company's directors or trustees. (b) With the written consent of the revocable trust grantor or agency principal, or if the trust is irrevocable or the trust grantor is deceased or reasonably believed by the trustee to be incapacitated, after providing advance notice at least 45 days before the use of the money or property to any person then entitled to be kept reasonably informed of the fiduciary account and its administration under the estates and protected individuals code, 1998 PA 386, MCL to , use the money or property to purchase any product, service, or security from or through the bank or an affiliate of the bank, including, but not limited to, an insurance product or a security that is underwritten or distributed by the bank or an affiliate of the bank or by a syndicate or selling group that includes the bank or an affiliate of the bank, if the purchase price is reasonable. Any advance notice required under this subdivision shall list the type of products, services, or securities available for purchase from or through the bank or an affiliate of the bank and shall provide the name and address of an individual at the bank to whom a beneficiary receiving the notice may direct any objection. If the bank receives a written objection to a notice provided under this subdivision, and the objection is not resolved or withdrawn, the bank shall not use the money or property to purchase any product, service, or security from or through the bank or an affiliate of the bank for at least 60 days after the bank receives the written objection. A bank or 1 or more affiliates of the bank may receive reasonable compensation in connection with the purchase of the product, service, or security under this subdivision. (4) As used in subsection (3), "registered investment company" means an investment company that is registered under the investment company act of 1940, 15 USC 80a-1 to 80a-64. (5) For purposes of this section, a bank is considered to hold funds or property in a fiduciary capacity if it is holding the assets as trustee, personal representative, custodian, conservator, guardian, agent, or in any other fiduciary capacity. 17

18 ATTACHMENT D Illinois Statutes 755 ILCS 45/2-9. Preservation of estate plan and trusts. In exercising powers granted under the agency, including powers of amendment or revocation and powers to expend or withdraw property passing by trust, contract or beneficiary designation at the principal's death (such as, without limitation, specifically bequeathed property, joint accounts, life insurance, trusts and retirement plans), the agent shall take the principal's estate plan into account insofar as it is known to the agent and shall attempt to preserve the plan, but the agent shall not be liable to any plan beneficiary under this Section unless the agent acts in bad faith. An agent may not revoke or amend a trust revocable or amendable by the principal or require the trustee of any trust for the benefit of the principal to pay income or principal to the agent without specific authority and specific reference to the trust in the agency. The agent shall have access to and the right to copy (but not to hold) the principal's will, trusts and other personal papers and records to the extent the agent deems relevant for purposes of this Section. This Section shall not apply to any Totten Trust, Payable on Death Account, or comparable trust account arrangement where the terms of such trust are contained entirely on the financial institution's signature card insofar as an agent acting under a power of attorney executed in accordance with this Act shall be permitted to withdraw income or principal from such account if the power of attorney grants the agent authority to conduct financial institution transactions on the principal's behalf and the agent's authority to access such account is not expressly limited or withheld in the agency. 760 ILCS 5/11. Accounts. (a) Every trustee at least annually shall furnish to the beneficiaries then entitled to receive or receiving the income from the trust estate, or if none, then those beneficiaries eligible to have the benefit of the income from the trust estate a current account showing the receipts, disbursements and inventory of the trust estate. A current account shall be binding on the beneficiaries receiving the account and on such beneficiaries' heirs and assigns unless an action against the trustee is instituted by the beneficiary or such beneficiary's heirs and assigns within 3 years from the date the current account is furnished. 760 ILCS 5/10. Majority of Trustees to Act. If there are 3 or more trustees of a trust, a majority of the trustees are competent to act in all cases after prior written notice to, or written waiver of notice by, each other trustee, but a dissenting trustee has no liability for the acts of the majority. 760 ILCS 5/16.1 Virtual representation. (d) Nonjudicial settlement agreements. (1) For purposes of this Section, interested persons means the trustee and all other persons and parties in interest whose consent or joinder would be required in order to achieve a binding settlement were the settlement to be approved by the court. (2) Except as otherwise provided in subsection (d)(3), interested persons, or their respective representatives determined after giving effect to the preceding provisions of this Section, may enter into a binding nonjudicial settlement agreement with respect to any matter involving a trust. (3) A nonjudicial settlement agreement is valid only to the extent its terms and conditions could be properly approved under applicable law by a court of competent jurisdiction. (4) Matters that may be resolved by a nonjudicial settlement agreement include but are not limited to: (A) interpretation or construction of the terms of the trust; (B) approval of a trustee's report or accounting; (C) exercise or nonexercise of any power by a trustee; (D) the grant to a trustee of any necessary or desirable administrative power; (E) questions relating to property or an interest in property held by the trust; (F) resignation or appointment of a trustee; (G) determination of a trustee's compensation; (H) transfer of a trust's principal place of administration; 18

19 (I) liability or indemnification of a trustee for an action relating to the trust; (J) resolution of disputes or issues related to administration, investment, distribution or other matters; (K) modification of terms of the trust pertaining to administration of the trust; and (L) termination of the trust, provided that court approval of such termination must be obtained in accordance with subsection (d)(5), and the court must conclude continuance of the trust is not necessary to achieve any material purpose of the trust; upon such termination the court may order the trust property distributed as agreed by the parties to the agreement or otherwise as the court determines equitable consistent with the purposes of the trust. (5) Any interested person may request the court to approve any part or all of a nonjudicial settlement agreement, including whether any representation is adequate and without conflict of interest, provided that the petition for such approval must be filed before or within 60 days after the effective date of the agreement. (6) An agreement entered into in accordance with this Section shall be final and binding on the trustee and all beneficiaries of the trust, both current and future, as if ordered by a court with competent jurisdiction over all parties in interest. (7) In the trustee's sole discretion, the trustee may, but is not required to, obtain and rely upon opinion of counsel on any matter relevant to this Section, including that any agreement proposed to be made in accordance with this Section could be properly approved by the court under applicable law, or that there is no conflict of interest between a representative and the person represented or among those being represented with respect to a particular question or dispute. 760 ILCS 5/4.25. Severance and consolidation. To sever any trust estate on a fractional basis into 2 or more separate trusts for any reason; to segregate by allocation to a separate account or trust a specific amount or gift made from any trust to reflect a partial disclaimer, to reflect or result in differences in federal tax attributes, to satisfy any federal tax requirement or election, or to reduce potential generation-skipping transfer tax liability, in a manner consistent with the rules governing disclaimers, such federal tax attributes, such requirements or elections, or any applicable tax rules or regulations, and income earned on a segregated amount or gift after segregation occurs shall pass to the designated take of such amount or gift; and to consolidate 2 or more trusts having substantially similar terms into a single trust. In managing, investing, administering, and distributing the trust property of any separate account or trust and in making applicable tax elections, the trustee may consider the differences in federal tax attributes and all other factors the trustee believes pertinent and may make disproportionate distributions from the separate trusts created. A separate account or trust created by severance or segregation shall be treated as a separate trust for all purposes from and after the date on which the severance or segregation is effective, and shall be held on terms and conditions that are substantially equivalent to the terms of the trust from which it was severed or segregated so that the aggregate interests of each beneficiary in the several trusts are substantially equivalent to the beneficiary's interests in the trust before severance, provided, however, that any terms of the trust before severance that would affect qualification of the trust for any federal tax deduction, exclusion, election, exemption, or other special federal tax status must remain identical in each of the separate trusts created. The provisions of this amendatory Act of 1993 apply to all trusts created, and actions taken before, on, or after the effective date of this amendatory Act of

20 ATTACHMENT E Indiana Statutes Revocation or amendment of trust by settlor. (e) A settlor's powers with respect to revocation, amendment, and distribution of trust property may be exercised by an agent under a power of attorney only to the extent expressly authorized by the terms of the trust or the power of attorney Revocable trusts; powers of settlor; duties of trustees. (a) While a trust is revocable and the settlor has the capacity to revoke the trust: (1) the rights of the beneficiaries are subject to the control of; and (2) the duties of the trustee are owed exclusively to; the settlor.(b) A settlor is presumed to have capacity for the purposes of subsection (a) until the trustee receives from at least one (1) licensed physician written certification that the settlor lacks the capacity to revoke the trust. (c) If a revocable trust has more than one (1) settlor, the duties of the trustee are owed to all of the settlors having capacity to revoke the trust. (d) During the period the power may be exercised, the holder of a power of withdrawal has the rights of a settlor of a revocable trust under this section to the extent of the property subject to the power. (e) If a trustee reasonably believes that a settlor of a revocable trust lacks capacity to revoke the trust, the trustee is authorized to provide information to the settlor's designated agent (even if the designated agent is one (1) of two (2) or more trustees) or to any beneficiary who, if the settlor were deceased, would be entitled to distributions from the trust. (f) A person who becomes a successor trustee of a revocable trust upon the death, resignation, or incapacity of a trustee who was also a settlor is not liable for any act or failure to act by the settlor while the settlor was trustee. (g) A successor trustee of a revocable trust who succeeds a trustee who was also a settlor of the trust does not have a duty to: (1) investigate any act or failure to act by the predecessor trustee; (2) review any accounting of the predecessor trustee; or (3) take action on account of any breach of trust by the predecessor trustee Accounting by trustees. (a) Unless the terms of the trust provide otherwise or unless waived in writing by an adult, competent beneficiary, the trustee shall deliver a written statement of accounts to each income beneficiary or his personal representative annually. The statement shall contain at least: (1) all receipts and disbursements since the last statement; and (2) all items of trust property held by the trustee on the date of the statement at their inventory value Rules of interpretation concerning a trustee's independence from the settlor. Absent clear and convincing evidence otherwise, a settlor of an irrevocable trust may not be considered the alter ego of a trustee. The following factors, alone or in combination, are not sufficient evidence to conclude that the settlor controls a trustee or is the alter ego of the trustee: (1) Any combination of the factors listed in section 15 of this chapter. (2) Isolated occurrences of the settlor signing checks, making disbursements, or executing other documents related to the trust as a trustee when the settlor is, in fact, not a trustee. (3) Requesting a trustee to make distributions on behalf of a beneficiary. (4) Requesting a trustee to hold, purchase, or sell any trust property Duties of trustee. (7) Upon reasonable request, give the beneficiary complete and accurate information concerning any matter related to the administration of the trust and permit the beneficiary or the beneficiary's agent to inspect the trust property, the trustee's accounts, and any other documents concerning then administration of the trust Exercise of powers by multiple, successor, or surviving trustees. Unless the terms of the trust provide otherwise: (a) Any power vested in two (2) trustees must be exercised by them jointly; any power vested in three (3) or more trustees must be exercised by a majority. (b) If there are two (2) or more trustees and they are unable to exercise a power under subsection (a) of this section: (1) If there is an immediate risk of irreparable damage to the trust property or the interest of any beneficiary before court approval could be obtained, any trustee may exercise the power and petition the court for approval after the power has been exercised; but (2) if there is no immediate risk of irreparable damage to the trust property or the interest of any beneficiary, any trustee may 20

21 petition the court for permission to exercise the power, but none may exercise the power prior to obtaining permission from the court. (c) A co-trustee is excused from liability incurred because of the exercise by a majority of a power vested in three (3) or more trustees if he: (1) refuses to join in the exercise of the power and mails a written dissent to any of the co-trustees; or (2) if the power was exercised without his knowledge, mails a written dissent to any co-trustee within a reasonable time after being informed that it has been exercised. (d) A successor trustee, additional trustee or surviving or remaining co-trustee may exercise all powers previously vested in the predecessor trustee or co-trustee Duties of co-trustees. Unless the terms of the trust provide otherwise, if there are two (2) or more trustees, each has a duty to: (a) participate in the administration of the trust; (b) take whatever action is reasonable to prevent a co-trustee from committing a breach of trust; and (c) take whatever action is reasonable to compel a co-trustee to redress a breach of trust Rules of interpretation concerning a beneficiary's influence over a trust. If a party challenges a settlor or a beneficiary's influence over a trust, none of the following factors, alone or in combination, may be considered dominion and control over a trust: (1) A beneficiary serving as a trustee or co-trustee. (2) The settlor or beneficiary holds an unrestricted power to remove or replace a trustee. (3) The settlor or a beneficiary: (A) is a trust administrator, a general partner of a partnership, a manager of a limited liability company, or an officer of a corporation; or (B) has any other managerial function in any other entity; that is owned in whole or in part by the trust. (4) A person related by blood or adoption to a settlor or beneficiary is appointed as trustee. (5) An agent, accountant, attorney, financial adviser, or friend of the settlor or a beneficiary is appointed as trustee. (6) A business associate of the settlor or a beneficiary is appointed as trustee. (7) A beneficiary holds any power of appointment over part or all of the trust property. (8) The settlor holds a power to substitute property of equivalent value. (9) The trustee may loan trust property to the settlor for less than a full and adequate rate of interest or without adequate security. (10) The trust contains broad purposes or highly discretionary distribution language.(11) The trust has only one (1) beneficiary eligible for current distributions Liability for breach of trust by co-trustee. A trustee becomes liable to the beneficiary for a breach of trust committed by his co-trustee if he: (a) participates in the breach of trust; (b) improperly delegates the administration of the trust to the co-trustee; (c) approves, acquiesces in or conceals a breach of trust; (d) enables the co-trustee to commit a breach of trust by his failure to exercise care in the administration of the trust; or (e) fails to use reasonable effort to compel the co-trustee, or, if the co-trustee has died, his estate, to redress a breach of trust Other remedies of the trustee. (a) If there is reasonable doubt with respect to any matter relating to the administration of the trust, the trustee is entitled to be instructed by the court. (b) The trustee is entitled to a review and settlement by the court of the accounts of his administration. (c) The trustee is entitled to a lien against the trust estate: (1) for any advances made by him under (a) (10); and (2) for the value of his services for which he is entitled to, but has not received, compensation as provided either under the terms of the trust or under Modification or termination of trust by court. (a) The court may modify the administrative or dispositive terms of a trust if, because of circumstances not anticipated by the settlor, modification or termination will further the purposes of the trust. To the extent practicable, the modification must be made in accordance with the settlor's probable intention. (b) The court may modify the administrative terms of a trust or terminate the trust if: (1) the purpose of the trust has been fulfilled; or (2) continuation of the trust on the trust's existing terms would: (A) be illegal, impossible, impracticable, or wasteful; or (B) impair the trust's administration. (c) If the trust terminates under this section, the court shall direct the trustee to distribute the trust property in a manner consistent with the purposes of the trust. (d) The court may modify the terms of a trust to give the settlor the power to revoke and modify the trust if the: (1) settlor intended to reserve the power; (2) settlor believed the power was reserved; and (3) power was omitted from the terms of the trust by mistake. 21

22 Power to direct a deviation from the terms of the trust. (a) Upon petition by the trustee or a beneficiary, the court shall direct or permit the trustee to deviate from a term of the trust if, owing to circumstances not known to the settlor and not anticipated by him, compliance would defeat or substantially impair the accomplishment of the purposes of the trust. In that case, if necessary to carry out the purposes of the trust, the court may direct or permit the trustee to do acts which are not authorized or are forbidden by the terms of the trust, or may prohibit the trustee from performing acts required by the terms of the trust. (b) The trustee may deviate from the terms of the trust as provided in subsection (a) of this section, without first obtaining the permission of the court, if there is an emergency or if he reasonably believes that there is an emergency, and before deviating he has no opportunity to apply to the court for permission to deviate. (c) The trustee is liable for any loss or damage which results if he fails to apply to the court for permission to deviate from the terms of the trust, when he knows or should know that, owing to circumstances not known to the settlor and not anticipated by him, compliance will defeat or substantially impair the accomplishment of the purposes of the trust Conflict of interest in exercise of powers. (a) If the duty of the trustee in the exercise of any power conflicts with the trustee's individual interest or the trustee's interest as trustee of another trust, the power may be exercised only under one (1) of the following circumstances: (1) The trustee receives court authorization to exercise the power with notice to interested persons as the court may direct. (2) The trustee gives notice of the proposed action in accordance with IC and: (A) the trustee receives the written authorization of all interested persons to the proposed action within the period specified in the notice of the proposed action; or (B) a beneficiary objects to the proposed action within the period specified in the notice of the proposed action, but the trustee receives court authorization to exercise the power. (3) The exercise of the power is specifically authorized by the terms of the trust. (b) For purposes of this section, the interest of an affiliate of the trustee will be deemed to be the interest of the trustee Self-dealing; transactions between trusts. (a) Unless the terms of the trust provide otherwise or the transaction is authorized under IC or IC , the trustee has a duty: (1) not to loan funds to the trustee or an affiliate; (2) not to purchase or participate in the purchase of trust property from the trust for the trustee's own or an affiliate's account; (3) not to sell or participate in the sale of the trustee's own or an affiliate's property to the trust; or (4) if a corporate trustee, not to purchase for or retain in the trust its own or a parent or subsidiary corporation's stock, bonds, or other capital securities. However, the trustee may retain such securities already held in trusts created prior to September 2, (b) Unless the terms of the trust provide otherwise, a corporate trustee may invest in, purchase for, or retain in the trust its own or an affiliate's obligations, including savings accounts and certificates of deposit, without the investment, purchase, or retention constituting a conflict of interest under section 5 of this chapter. (c) Unless the terms of the trust provide otherwise, a corporate trustee does not violate subsection (a) by investing in, purchasing for, or retaining in the trust its own or an affiliate's obligations, including savings accounts and certificates of deposit, if the payment of each obligation is fully insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, or any insurer approved by the department of financial institutions under IC (d) If the terms of the trust permit the trustee to deal with a beneficiary for the trustee's own account, the trustee has a duty to deal fairly with and to disclose to the beneficiary all material facts related to the transaction which the trustee knows or should know. (e) Unless the terms of the trust provide otherwise, the trustee may sell, exchange, or participate in the sale or exchange of trust property from one (1) trust to the trustee as trustee of another trust, provided the sale or exchange is fair and reasonable with respect to the beneficiaries of both trusts and the trustee discloses to the beneficiaries of both trusts all material facts related to the sale or exchange which the trustee knows or should know. (f) This section does not prohibit a trustee from enforcing or fulfilling any enforceable contract or agreement: (1) executed during the settlor's lifetime; and (2) between the settlor and the trustee in the trustee's individual capacity. 22