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specify the character or the class of investments to be made and does not expressly vest in the bank, its officers, or its directors, a discretion in the matter of investments, funds so held in trust must be invested only in those securities in which .corporate or individual fiduciaries in the state in which the bank is located may lawfully invest.

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A national bank acting as executor or administrator or in any other fiduciary capacity, under appointment by a court of competent jurisdiction, must make all investments under an order of that court, and copies of all such orders shall be filed and preserved with the records of the trust department of the bank. If the court, however, by general order vests a discretion in the national bank to invest funds held in trust, or if, under the laws of the state in which the bank is located, corporate fiduciaries appointed by the court are permitted to exercise such discretion, the national bank so appointed may invest such funds in any securities in which corporate or individual fiduciaries in the state in which the bank is located may lawfully invest.

§ 480. Trust Funds Awaiting Investment

Funds received or held in the trust department of a national bank, awaiting investment or distribution, may be deposited in the commercial department of the bank to the credit of the trust department, provided the bank first delivers to the trust department, as collateral security, United States bonds, or other readily marketable securities owned by the bank, equal in market value to the amount of the funds so deposited.

Before a national bank deposits any of its trust funds in its commercial department, it must deliver to the trust department securities of the kinds and in the amounts specified in this section of the regulation. A deposit of securities with the state

banking authorities, as security for court and private trusts generally, is not a compliance with the requirement quoted above.

REVIEW QUESTIONS

1. What is the meaning of the word "fiduciary"? What are the usual fiduciary relations?

2. What are the qualifications of an executor? Why is it difficult to select an individual executor?

3. Who may act in a fiduciary capacity? What institutions may act as trustees?

4. How long have trust companies had such power? Why have state banks been authorized to exercise trust powers?

5. When were national banks authorized to act as trustees? Under what circumstances are they permitted to act?

6. What did the courts decide as to the exercise of trust powers by national banks?

7. Are state laws regulating corporate trustees binding on national banks? What minimum paid-in capital is required for trust companies in your state? How are the beneficiaries of trust funds protected in your state?

8. How are trust funds segregated? What is the rule as to state inspection of the trust department of a bank? May trust funds be used as any other deposit? What is the rule as to this? Is there any other law in your state to secure trust funds in banking institutions? Who must make any affidavit required? 9. Who has authority to issue permits to national banks to exercise trust powers? What are the minimum requirements in your state? Who has charge of the trust business in a bank? 10. Who manages the trust department of a national bank? Why does the management of such a department vary in the different states?

II. How must trust funds be invested? Who decides on investments left to "the discretion of the bank"? What are the statutory rules in your state as to investments of trust funds?

12. What are the general rules as to banks appointed to execute trusts under an order of court?

13. When may trust funds be deposited in the commercial department as other funds are deposited? Does the general deposit prescribed by statute cover such deposits?

CHAPTER LVII

ADVANTAGES OFFERED BY CORPORATE
FIDUCIARIES

§ 481. Difficulty of Selecting a Suitable Executor

The advent of the bank in a fiduciary capacity is comparatively recent. Even the trust company acting as fiduciary gives a service with which the public at large is more or less unfamiliar. It is the purpose of this chapter to point out some of the many advantages of a bank or a trust company as a fiduciary over the individual.

When a person prepares to execute his last will and testament, one of the first difficulties to confront him is the selection of an executor and trustee. He must select someone who will in all probability survive him. He hopes that the person will live to administer the estate and to execute the trusts created by the will.

The uncertainty of human life is such that no matter what care is used in making the selection, the person chosen may die before the testator or before completing his executorship, or if more than one is appointed, all may die or otherwise become incapacitated and therefore unable to execute the trust.

§ 482. Why a Bank or a Trust Company Is to Be Preferred

If a bank or a trust company is designated, all this difficulty is avoided. The life of the corporate executor or trustee is perpetual. In the nature of things it cannot become ill or incapacitated.

By the terms of a certain will, trusts were set up, and three persons designated as executors and trustees. Two of them

were friends of the testator and the third was the testator's wife. The testator died and all three executors duly qualified.

Before the trusts terminated, one of the friends resigned; then one died. The widow continued to act for a number of years and then she died. Her oldest son made application for appointment. He was then a middle-aged man of robust health. However, on the very day he was appointed word was received by his attorney that he had died the previous day. Then followed further difficulties, and unpleasant litigation was avoided only by a compromise arrangement which provided for the appointment of two trustees, neither of whom had had any previous experience and one of whom was unqualified for the duties of trustee by human frailties. Neither of them would ever have been selected by the testator. Had he in the first place designated a bank or a trust company as his executor and trustee, none of these difficulties could ever have arisen.

The corporate fiduciary, whether a bank or a trust company, never becomes ill. It never goes on a vacation or a business trip. It is always at its place of business, ready to attend to the affairs of the estate entrusted to its care.

How often does it happen in the case of an individual executor or trustee that, at the very time it is necessary to see him about some business of the estate, he is away, or is unable to attend to it, no matter how vitally important it may be, because he has been ill or has been called away on his own affairs?

§ 483. The Accessibility of a Corporate Fiduciary

An important consideration in the selection of a fiduciary is accessibility. A bank or a trust company is always accessible. Its office is centrally and, to all intents and purposes, permanently located. An individual frequently moves his office or his residence. Both office and residence may be and often are

out of the way. People who have business to transact with the estate may not find it easy to locate the individual executor's place of business. Practically everyone knows the location of the bank or the trust company. Also everyone is familiar with the regular business hours of the bank or the trust company, whereas the business hours of individuals vary with the nature of their businesses.

§ 484. Competency of Corporate Fiduciaries

Acting in a fiduciary capacity is a business in and of itself. It requires a great deal of study and experience. How many individuals have ever studied the duties of a fiduciary? How many have had any experience in a position of this kind? To be sure, a few individuals have acted in some one of these capacities once or twice before, but how far that is from making them expert!

Is it reasonable to expect an inexperienced person, even though well educated and intelligent, to transact an important piece of business with very little or no previous preparation, and about which he has hitherto known almost nothing? Then how evident it is that a testator should not appoint an executor or a trustee who has no training or experience in that capacity.

A man should always realize that the work of his lifetime, namely, the building up of sufficient means to provide for his family after he has gone, may be defeated by the acts of an inexperienced fiduciary. Remember that in such case there is no indemnity to be obtained because executors often do not have to file bonds, and even when required to do so the bond can be relied on only for infidelity, that is, to make good positive dishonesty.

On the other hand, a bank or a trust company is thoroughly experienced in all these fiduciary capacities and may be said to be fairly expert. The men in charge of the work are handling the business of the fiduciary every business day of

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