Pennsylvania Trustee powers

The general powers

Pennsylvania starts from breadth: except as the trust's terms or other provisions of Title 20 provide, a trustee has all the powers over the trust property that an unmarried competent owner has over individually owned property, and may exercise them without court approval from the trust's creation until final distribution (20 Pa.C.S. §7780.5). Breadth is not license; each power is exercised under the duties to administer in good faith (§7771), to act solely in the beneficiaries' interests (§7772), to act impartially (§7773) and to administer prudently (§7774).

The illustrative powers

The act lists powers a trustee may exercise under the general grant (20 Pa.C.S. §7780.6). Among them:

• To accept, hold, invest in and retain investments under the prudent investor rule.
• To pay or contest a claim, settle a claim by compromise or arbitration, and release a claim belonging to the trust.
• To resolve a dispute about the trust's interpretation or administration by mediation, arbitration or another alternative procedure.
• To prosecute or defend actions for the protection of the trust's assets.
• To insure the trust's assets, and to pay taxes, assessments, the trustee's compensation and the expenses of the administration.
• To sell or exchange real or personal property at public or private sale, and to lease, grant options and borrow against trust assets.
• To repair, improve or develop real estate, and to exercise the rights of ownership of life insurance policies the trust holds.

Discretion, and the standard that governs it

A trustee exercises a discretionary power in good faith and in accordance with the trust's terms and purposes and the beneficiaries' interests, however broad the discretion the terms grant — words like "absolute", "sole" or "uncontrolled" do not change that (20 Pa.C.S. §7780.4). A beneficiary's creditor cannot compel a discretionary distribution, even where the discretion is expressed as a standard or the trustee has abused it, subject to the exceptions the statute states (20 Pa.C.S. §7744).

Delegation and cotrustees

A trustee may delegate duties and powers a prudent trustee of comparable skills might delegate; a trustee who uses reasonable care, skill and caution in selecting the agent, setting the scope and terms of the delegation and reviewing the agent's actions is not liable for the agent's decisions or actions, and the agent owes the trust a duty of reasonable care (20 Pa.C.S. §7777).

Cotrustees who do not reach a unanimous decision may act by majority; where no majority agrees, the court may, on petition, direct the exercise or nonexercise of the power; and each cotrustee participates unless unavailable or properly delegated (20 Pa.C.S. §7763).

Directed trusts: when someone else holds a power of direction

Pennsylvania's Directed Trust Act — Subchapter H.1 (20 Pa.C.S. §7780.11), in force since October 13, 2024 — lets a trust's terms grant a trust director a power of direction extending to any of the trustee's powers (§7780.15); a director whose powers include modifying the trust's terms is a trust protector (§7780.17), and terms that appoint a "trust director for investments" with a citation to the act give that director the investment powers the act lists (§7780.16).

A directed trustee takes reasonable action to comply with a director's exercise of a power and is not liable for doing so, except to the extent compliance would be the trustee's willful misconduct (20 Pa.C.S. §7780.20); unless the terms provide otherwise, a directed trustee has no duty to monitor the director or to inform or advise anyone about how it might have acted differently (§7780.22). The act applies to decisions and actions after it took effect (§7780.13).

Changing a trust: there is no decanting statute

Pennsylvania has no decanting statute — no general power for a trustee to pour one trust's property into a new trust with different terms. A Pennsylvania trust changes in the ways the act provides: by the consent of the settlor and all beneficiaries, or of all beneficiaries where the court finds the change consistent with a material purpose (20 Pa.C.S. §7740.1); by the court for circumstances the settlor did not anticipate (§7740.2); by a binding nonjudicial settlement agreement within the act's limits (§7710.1); by dividing or combining trusts (§§7740.7, 7740.8); or by converting to a unitrust where the instrument does not prohibit it (20 Pa.C.S. §8105).

Dealing with banks and title companies: the certification of trust

Instead of a copy of the trust instrument, a trustee may give a person other than a beneficiary a certification of trust stating the trust's existence and the instrument's date, the settlor, the acting trustee's identity and address, the trustee's powers, the trust's revocability and who may revoke it, the cotrustees' signing authority, the trust's taxpayer identification number and the manner of taking title (20 Pa.C.S. §7790.3). It may be signed or otherwise authenticated by any trustee, need not contain the dispositive terms, and states that the trust has not been revoked, modified or amended so as to make it incorrect; the recipient may require copies of the excerpts that designate the trustee and confer the power to act.

When a licensed Pennsylvania attorney is the right next call

TrusteeClear organizes the record and, for a trustee using it directly, places the trustee's own facts into the certification's blanks; it does not decide whether a power reaches a transaction or how a director's powers and the trustee's fit together. Many trustees bring the record to a licensed Pennsylvania attorney of their choosing before a sale to a family member, a borrowing against trust assets, a change to the trust, or a disagreement with a trust director.