We disagree. Based upon the information provided, B is the UPE pursuant to 801.1(b)(2).
Question
We have the following request for informal interpretive advice relating to the ultimate parent entity (“UPE”) of a trust.
Facts
Settlor
S is the settlor of the trust. The trust is irrevocable. S has no reversionary interest in the corpus of the trust. S does not have the right to remove and replace the trustee of the trust.
Trustee
B is the designated and current sole trustee of the trust under the trust document.
Trustee Designator
The trust document names B as the “Trustee Designator” for the trust. As the Trustee Designator, B has authority over the trust and can, at any time and from time to time, (1) appoint one or more entities to serve as trustee; (2) remove any trustee; (3) appoint successors to any trustee; and (4) change the succession of the trustees. The trust document further provides that no appointment or removal of any trustee (or any successors to any trustee) will take effect unless or until approved by B in his individual capacity (and not in his capacity as Trustee Designator).
B may resign as trustee at any time and, as Trustee Designator, designate a successor trustee.
The Trustee Designator is the son of the settlor of the trust and the father of the trust beneficiaries; however, he has no beneficial interest in the trust. The Trustee Designator is not a beneficiary of the trust and does not have an economic interest in the corpus of the trust (e.g., does not have any rights to the corpus of the trust, any rights to revoke the trust or any reversionary interests). The Trustee Designator is expressly not a fiduciary of the trust and owes no fiduciary duties for the acts (or failure to act) as Trustee Designator.
No other person has the contractual power presently to remove and replace the trustee. Consequently, no other person controls the trust.
Discussion and Analysis
Trustee Resignation
At present, B is the only trustee of the trust. B can resign as trustee at any time and, as Trustee Designator, designate a successor trustee. The ability to designate his own successor as trustee does not count as the ability to remove and replace a trustee for HSR purposes and does not constitute control of the trust. See Interpretation Nos. 12, 13 and 14 of the Premerger Notification Practice Manual (Fifth Edition). See also Informal Interpretation Letter No. 1006005 (June 15, 2010).
Approval of Trustee Appointment
No appointment or removal of any trustee will take effect unless or until approved by B, in his individual capacity (and not in his capacity as Trustee Designator). The power to consent to, approve or veto the replacement of a trustee does not count as the ability to replace a trustee and does not result in B controlling the trust. See Interpretation Nos. 12, 13 and 14 of the Premerger Notification Practice Manual (Fifth Edition). See also Informal Interpretation Letter No. 1006005 (June 15, 2010).
Trustee Designator
As Trustee Designator, B can remove himself as trustee and replace himself as trustee by appointing a successor trustee. B has the contractual power presently to remove and replace himself as trustee. The issue is whether B, in his capacity as Trustee Designator and through his ability remove and replace himself as trustee, controls the trust.
We did not locate any informal interpretations discussing a Trustee Designator, however, we did locate several analogous informal interpretations concluding that a “trust protector,” a person having the right to remove and replace a trustee for any or no reason, did not control a trust when the trust protector did not have a separate economic interest in the assets of the trust (e.g., the trust protector did not have any rights to the corpus of the trust, any rights to revoke the trust or any reversionary interests). See Informal Interpretations Letters Nos. 2308004-0 (August 10, 2023) (“If the trust protector does not have a separate economic interest in the assets of the trust (e.g., where the trust protector is a third-party administrator and not the grantor), then the trust is its own UPE.”); 1301002 (January 3, 2013) (trust protector with no economic stake in the corpus of the trusts does not control the trusts); 1402002 (February 28, 2014) (trustee protector with no economic interest in the corpus of the trust does not control the trust); and 1805001 (May 21, 2018) (if the trust protector’s role is analogous to that in Informal Interpretation Letter No. 130100, then it is not the UPE).
Conclusion
Based on the foregoing, it is our understanding that the trust is its own UPE since: (1) the trust is irrevocable; (2) S did not retain any reversionary interest in the corpus of the trust; (3) B’s ability to resign as a trustee at any time and, as Trustee Designator, designate a successor trustee does not count as the ability to remove and replace a trustee and does not constitute control of the trust; (4) B’s power in his individual capacity (and not in his capacity as Trustee Designator) to consent to, approve or veto the replacement of a trustee does not count as the ability to replace a trustee and does not result in B controlling the trust; (5) B, as Trustee Designator with no separate economic interest in the assets of the trust, does not control the trust; and (6) no other person has the contractual power presently to remove and replace the trustee and control the trust. As a result, the trust is its own UPE and holds all of the assets comprising the corpus of the trust. See Rule 801.1(b)(2) and Rule 801(c)(4); Interpretation Nos. 12, 13 and 14 of the Premerger Notification Practice Manual (Fifth Edition).
Please confirm our understanding that the trust is its own UPE and that it holds all of the assets comprising the corpus of the trust.