2) Administration Flashcards
trustee’s powers: kinds
1) express
2) implied
trustee’s powers: express
spelled out in trust agreement. positive and negative (what can’t do)
trustee’s powers: implied
trustee has power to do what is nec or appropriate to carry out terms of the trust
if trustee uncertain of his power
ask the court
multiple trustees: how do they decide to act
if 3+ generally need unanimous
if can’t reach unanimous, majority rule
when can trustee resign
need 1 of these:
1) trust instrument allows
2) gets permission from court
3) gets consent from all beneficiaries
trustee resign: when will court give permission:
NOT if removal not in best interest of beneficiaries
trustee delegation: ok?
no – trustee may not delegate performance of his duties to others
trustee delegation: exception
ok delegate if:
1) trust agreement explicitly grants permission to delegate
2) duties that are purely administrative, do not constitute the entire administration of the trust –> ok delegate
liability of trustee to beneficiaries: consider
1) duties
2) breach
3) defenses
trustee’s duty to beneficiaries
1) general duty
2) follow all instructions from settlor
3) diversify assets
4) closely supervise any agent delegated duties
5) earmark assets
6) no self-dealing
7) accounting
trustee’s duties to beneficiaries: general duty: def
to act with due care, as explained by the prudent investor rule
prudent investor rule: def
trustee should act like a reasonable and prudent investor in how she manages assets of the trust
trustee duty to beneficiaries: follow all instructions from settlor: result
following all instructions = shield from liability
trustee duty to beneficiaries: follow all instructions from settlor: exception
unless it is obvious to a RP that the instructions should not be followed
trustee duty to beneficiaries: earmark assets; def
- -must be kept separate fro trustee’s own property
- -must take title to it in a way that makes its identity as trust property readily apparent
trustee duty to beneficiaries: avoid self-dealing: def
can have no personal benefit to trustee or trsutee’s spouse
trustee duty to beneficiaries: avoid self dealing: exception
is ok compensate trustee for duties, by statute
if trustee has special skills and is doing more than trustee typically does, need to compensate for that too
trustee duty to beneficiaries: accounting: def
trustee must provide court w accounting of all transactions entered into on behalf of the trust, at these times:
- -when req’d by statute
- -when requested in court action
trustee’s defenses to liability: list
1) offset profits
2) exculpatory clause
3) consent
4) laches/SOL
5) dissent
trustee defenses: offset profits: Def
not a defense!!
where trustee tries to offset a loss on 1 investment with a gain in a different investment, in attempt to negate liability
trustee defenses: exculpatory clause: def
the clause can relieve trustee from negligent liability but NOT intentional/reckless
trustee defenses: consent: reqs
must be by:
legally competent beneficiary
with all the relevant info
trustee defenses: consent: result
will shield trustee from liability to THAT beneficiary (but not any who did not consent)
trustee defenses: dissent: def
dissenting trustee won’t be held liable, as long as she expresses dissent in writing to cotrustees
trustee liability: remedies
1) surcharging the trust
2) rescission
3) injunction
4) removal of trustee
trustee remedies: surcharging the trustee: def
trustee can be sued for damages in amount of actual loss OR potential lost profit (constructive trust)
trustee remedies: rescission: def
can rescind if an improper transaction by trustee
improper transaciton: def
one that breaches duty of trustee
trustee remedies: injunction: def
- -stop improper action by trustee or
- -compel trustee to perform his duties
trustee remedies: remove trustee: ways
1) by terms of trust
2) seek court order to have trustee removed
liability of trustee to 3rd parties: rule
depends on tort vs k
liability of trustee to 3rd parties: k
trustee pays if breach
if k damages,
can get indemnification/ reimbursement if:
1) k properly entered into
2) breach of k was not result of trustee’s breach of duty
liability of trustee to 3rd parties: tort
trustee pays
can get indemnification/ reimbursement if: was not personally at fault
trust is suing – how?
default: trustee sues on behalf of trust
when can beneficiaries sue on behalf of trust?
1) trustee fails or refuses to sue
2) trustee knowingly participates w 3rd party in causing loss to trust
3) trustee has abandoned the trust + no successor appointed
