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Trustee Liability and ESOPS

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As a general rule our Trust Department does not accept ESOPS. We have an opportunity to Trustee what seems, on the surface, to be a good plan. Can anyone point me to a resource where I can find a thorough, yet concise summary of Trustee liability with respect to ESOPs that could be used to help upper management understand and assess ESOP Trustee risk?

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There are two very good sources of information regarding ESOPs. The first is The ESOP Association, which is based in Washington, D.C. The second is the National Center for Employee Ownership, which is based in Northern California. I'm fairly certain that there are hotlinks to both them (in BenefitsLink) under the topic of ESOPs.

I strongly urge you to retain your own counsel to represent you with respect to ESOP transactions. Find someone who specializes in them. It is very arcane area, with only a few dozen attorneys in the entire country do them on a regular basis.

Also, representing the trustee is a very different role than representing the selling shareholders or the employer sponsoring the ESOP. I know that because I represent a major California-based bank on the ESOP transactions in which it serves as the trustee.

Similarly, you should have your own financial advisor (i.e, an appraisal company). Again, make sure that they do ESOPs on a regular basis.

If you have competent advisors, ESOPs are not unduly risky. Many banks avoid them as a policy matter, so that you may find that doing ESOPs can be a very effective marketing tool.

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Kirk Maldonado

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