Question
April 20, 2006
Mr. Michael B. Verne
Premerger Notification OfficeBureau of Competition
Federal Trade Commission
Room 303
600 Pennsylvania Avenue, N.W. Washington, D.C. 20580
Dear Mike:
The purpose of this letter is to confirm our telephone conference on April 19, 2006 in which you concluded that, under the facts described below, the individualdescribed below does not control the trust. In particular, our inquiry relatedto the interpretation of the staff of the Federal Trade Commission of Rule801.1(b)(2) relating to whether the individual described below has thecontractual power presently to designate 50% or more of the trustees of thetrust. The relevant facts, as we discussed them, are as follows:
"X andhis wife, Y, are the settlors of a grantor trust, a generation skipping trustestablished for estate planning purposes for the benefit of theirgrandchildren. The trust is irrevocable and neither X nor Y retains anyreversionary interest in the corpus of the trust. X, at present, is the soletrustee of the trust. Under the trust documents, an individual acting astrustee has the authority to appoint his successor effective upon hisresignation as trustee. This right to appoint a successor belongs to the personthen acting as trustee and is not a personal contract right which X holds inthe event he no longer serves as trustee. In other words, the right to appointa successor is inherent with the position of trustee and is not a personalcontract right held by X. If a trustee resigns and fails to appoint asuccessor, then the trust documents designate individuals, in descending orderof priority, who are to serve as the successor trustee. Thus, a trustee mayappoint a successor effective only upon his resignation and, if he fails toappoint a successor, then a successor is chosen by operation of the trustdocuments. Under the terms of the trust documents, except for X's ability toappoint a successor effective upon his resignation as described above, neitherX nor Y has the authority to remove a trustee and appoint a successor trustee.To state it another way, while X has the power to appoint his own successor, hehas no mechanism for input in the appointment of his successor'ssuccessor."
Based on thesefacts, you concluded that X does not control the trust.
Pleasecall me immediately at (redacted) should the position of the Federal TradeCommission staff with regard to this matter be different from that set forthabove. In addition, please retain this letter in your files. I appreciate verymuch your assistance and helpful advice on this matter.