Trustee/Custodian

In Texas, a trust can be created only by a written instrument.  For this reason, the purported Trustee is required to state that he or she is a trustee under a valid and existing trust created by a written trust agreement.  The Bank must obtain a copy of the Trust Agreement, and any amendments to determine if it gives the Trustee authority to borrow money, guaranty indebtedness and/or pledge the trust’s property as collateral.  A Trust Authorization located at the end of this Chapter should also be obtained.  This document specifically references borrowings from the Bank. Collateral in the name of a trustee, guardian, personal representative, custodian under the Texas Uniform Transfers to Minors Act (a minor being a person younger than 21 years of age) or other fiduciary should not be accepted as collateral for a loan to the fiduciary unless the loan proceeds are applied for the benefit of the beneficiary and only if the authority of that fiduciary to pledge the collateral is documented.

CAUTION: If a debtor trust is not a registered organization, UCC 9.503 provides that the financing statement will sufficiently reflect the name of the debtor only if the financing statement reflects (i) the name of the trust specified in the document that creates the trust or (ii) if no name is specified, the name of the settlor or testator.  If the name of the trust debtor is determined pursuant to clause (i), the financing statement also must indicate that the collateral is held in trust.  If, however, the name of the trust debtor is determined pursuant to clause (ii), there must be information to distinguish the debtor trust from other trusts to which the named settlor or testator is acting in the same capacity and, if not otherwise so indicated, also an indication that the collateral is being held in trust.