Estate, Powers and Trusts, § 11-1.9: Power of Fiduciary or Custodian for Fiduciary to Deposit Securities in a Central Depository

A fiduciary is a person who holds a legal relationship of trust with respect to another person. With regard to estate planning, examples of fiduciaries include an executor of a decedent’s estate and the trustee of a living or testamentary trust. However, a fiduciary may also be a bank or other financial institution that holds assets for the benefit of someone else. Or a financial institution may be the custodian of assets that a fiduciary holds for the benefit of someone else. Under New York estate law there are rules and regulations that such financial institutions must follow. For example, New York Estate, Powers and Trusts, § 11-1.8, financial institutions acting as fiduciaries or custodians must keep accurate records of ownership of securities. As you contemplate drafting your will and creating other estate planning documents, it is important to understand the role of an executor, trustee, and other fiduciaries and custodians who may play a part in managing your estate once your pass away. It is important to contact an experienced New York Estate Administration Lawyer who will educate you on the duties and responsibilities of fiduciaries and who will make sure that your estate planning documents reflect your wishes and are consistent with New York probate law.

1. Tax elections by personal representatives: Estates, Powers and Trusts, § 11-1.2
2. Validity of execution of power to sell, mortgage or lease real property by less than all qualifying executors: Estates, Powers and Trusts, § 11-1.4
3. Payment of testamentary dispositions or distributive shares: Estates, Powers and Trusts, § 11-1.5
4. Property held as a fiduciary to be kept separate: Estates, Powers and Trusts, § 11-1.6
5. Power of fiduciary or custodian for fiduciary to deposit United States government and agency securities with a federal reserve bank: Estates, Powers and Trusts, § 11-1.8

When an executor, trustee or other fiduciary manages the investments of an estate or trust, it may be necessary to deposit assets with a bank or other financial institution. The financial institution will then service as a fiduciary or a custodian with respect to the funds deposited. In such a case institution must follow New York estate law related to depositing securities with clearing corporation. These rules state that:

• The financial institution is authorized to deposit securities into a clearing corporation as defined in the Uniform Commercial Code.
• The records must always show for whom the deposit was made.
• Upon demand the financial institution must show the fiduciary records of such deposits.

1. Notwithstanding any other provision of law, any fiduciary (as defined in § 1-2.7) holding securities in its fiduciary capacity, any bank, trust company or private banker holding securities as a custodian or managing agent, and any bank, trust company or private banker holding securities as custodian for a fiduciary pursuant to § 11-1.1(b)(9), is authorized to deposit or arrange through a subcustodian or otherwise for the deposit of such securities in a clearing corporation (as defined in article eight of the Uniform Commercial Code).  When such securities are so deposited, certificates representing securities of the same class of the same issuer may be merged and held in bulk in the name of the nominee of such clearing corporation with any other such securities deposited in such clearing corporation by any person regardless of the ownership of such securities, and certificates of small denomination may be merged into one or more certificates of larger denomination.  The records of such fiduciary and the records of such bank, trust company or private banker acting as custodian, as managing agent or as custodian for a fiduciary shall at all times show the name of the party for whose account the securities are so deposited.  Ownership of, and other interests in, such securities may be transferred by bookkeeping entry on the books of such clearing corporation without physical delivery of certificates representing such securities.  A bank, trust company or private banker so depositing securities pursuant to this § shall be subject to such rules and regulations as, in the case of state chartered institutions, the state superintendent of financial services and, in the case of national banking associations, the comptroller of the currency may from time to time issue.  A bank, trust company or private banker acting as custodian for a fiduciary shall, on demand by the fiduciary, certify in writing to the fiduciary the securities so deposited by such bank, trust company or private banker in such clearing corporation for the account of such fiduciary.  A fiduciary shall, on demand by any party to a judicial proceeding for the settlement of such fiduciary's account or on demand by the attorney for such party, certify in writing to such party the securities deposited by such fiduciary in such clearing corporation for its account as such fiduciary.
2. his § shall apply to any fiduciary holding securities in its fiduciary capacity, and to any bank, trust company or private banker holding securities as a custodian, managing agent or custodian for a fiduciary, acting on the effective date of this § or who thereafter may act regardless of the date of the agreement, instrument or court order by which it is appointed and regardless of whether or not such fiduciary, custodian, managing agent or custodian for a fiduciary owns capital stock of such clearing corporation.

Making a will, trust and other estate planning documents and appointing fiduciaries will affect how your estate is managed once you pass away. It will also impact the financial future of your family members. It is important to make sure that you understand the rules related to how your assets will be managed by those who you name as fiduciaries. The staff at Stephen Bilkis and Associates has years of experience working closely with New York clients to draft wills and other estate planning documents such as trusts, powers of attorney and living wills. To learn more about estate planning, contact us at 800.696.9529 to schedule a free, no obligation consultation regarding your estate plan.