Regulator Panel Diana Brannon Trust Examination Specialist Federal Deposit Insurance Corporation San Francisco, CA

Regulator Panel - FDIC Scott on Trust or Restatement of Trust 16 Duties of a Trustee How do they effect a trust officer’s daily life, and what are common regulatory findings?

Regulator Panel - FDIC 1 - Duty of Skill and Care Documentation, documentation, documentation Policies, policies, policies

Regulator Panel - FDIC 2 – Duty of Loyalty Conflicts of interest with affiliates Own-bank stock and products Receipt of undisclosed fees

Regulator Panel - FDIC 3 – Duty Not to Inappropriately Delegate Uniform Prudent Investor Act – appropriate delegation Deferral to co-trustees

Regulator Panel - FDIC 4 – Duty to Keep and Render Accounts Operations 5 – Duty to Furnish Information Beneficiary access

Regulator Panel - FDIC 6 – Duty to Keep Trust Property Separate Crumbling “Chinese Wall”? 7 – Duty to Keep and Control Trust Assets Controls over personal property

Regulator Panel - FDIC 8 – Duty to Make Trust Assets Productive Initial investment review Annual review process 9 – Duty to Pay Income to Beneficiary

Regulator Panel - FDIC 10 – Duty to Deal Impartially with Beneficiaries Poor documentation Appearance of favoring current beneficiary over remainder beneficiaries

Regulator Panel - FDIC 11 – Duty with Respect to Person Holding Power to Control Receiving directions 12 – Duty with Respect to Co- Trustees No action is an action

Regulator Panel - FDIC 13 – Duty to Defend Actions Defense costs 14 – Duty to Use Reasonable Care in Performing All Actions Risk management starts at the door

Regulator Panel 15 – Duty to Review and Enforce Claims Shareholder class action lawsuits Additional fees for collection should not be charged to fiduciary accounts 16 – Duty to Preserve Trust Property Vault controls

Regulator Panel Self-Directed IRAs Not “just a custodian” Internal Revenue Code Section 408(h) For purposes of this section, a custodial account shall be treated as a trust if the assets of such account are held by a bank (as defined in subsection (n)) or another person who demonstrates, to the satisfaction of the Secretary, that the manner in which he will administer the account will be consistent with the requirements of this section, and if the custodial account would, except for the fact that it is not a trust, constitute an individual retirement account described in subsection (a). For purposes of this title, in the case of a custodial account treated as a trust by reason of the preceding sentence, the custodian of such account shall be treated as the trustee thereof.

Regulator Panel IRS imposes duties upon IRA custodians that cannot be waived by customers Valuation Fair market value reporting requirement for Form 5498 Prohibited Transactions Policies and procedures Identification and appropriate actions

Regulator Panel Other IRA Issues Real Estate LPs/LLCs Note Receivables UBTI

Regulator Panel Regulation R Applies to all banks Bank wide assessment Custody accounts excluded from relationship compensation test

Regulator Panel QUESTIONS? COMMENTS?