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4000 - Advisory Opinions

Beneficiary Without Collective Ownership Rights in Bank Stock Trust is Not Shareholder


October 1, 1979

Mary Ellen Drury, Regional Counsel

In light of your August 24, 1979, letter we have reconsidered our opinion that a particular beneficiary of two trusts is a principal shareholder by virtue of owning more than 10 percent of the stock in a bank.

You represent the nature and terms of the trust in question as follows:

One trust was created by the last will and testament of the father of the person inquired about. Another trust was created by an inter-vivos trust by the mother of such person. Each trust named the same person as Trustee. The trustee holds one-half (1/2) of the bank stock in question under one trust and one-half under the other trust. Each trust provides that during the lifetime of the mother all of the income, interest and profits derived from the property being held in trust shall be distributed to the mother. All powers with reference to the bank stock and other property being held in trust are vested exclusively in the trustee and his successor trustees. The beneficiary in question has no right at any time to control or direct the voting of the stock in question. Upon the death of the mother each trust provides that one-half of the property being held in trust will continue to be held in trust by the trustee for and during the natural life of the beneficiary in question. Upon the death of the beneficiary the stock passes to his surviving child or children. The trustee during the term of the trust is empowered "to generally do all things which said trustee could do if he or it owned and held the legal as well as the equitable title to all the property making up said residual estate (the trust property)". Should the trustee elect to sell the bank stock the instruments provide that the beneficiaries shall have the right of first refusal.

Under the trusts "no beneficiary shall have the power to sell, assign, transfer, encumber or in any manner dispose of or anticipate his or her interest in said property . . . "

The trustee is authorized in each instrument to terminate the trust in 1989 and prior to the death of the beneficiary in question if the trustee is of the opinion that such action would be to the best interest of the beneficiary. The decision of the trustee is final.

Since the individual in question does not have control, title, enjoyment of the interest or profits, or the right to transmit the stock to others, he does not appear to have the collection of rights normally associated with ownership. Consequently, he does not appear to be a principal shareholder of the bank at this time, and subject to section 215.4 of Regulation O.

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