5. Liability of Trustee in Contract and Tort

Question 1

How do you determine if a trustee is personally liable in a contract?

Answer 1

If trustee signed only on behalf of the trust, no personal liability.

If trustee signed personally, and merely mentioned trust, then trustee has personal liability.

Question 2

Even if there is personal liability the trustee will be reimbursed by the trust if two (2) things are satisfied:

Answer 2

1. The contract was within the powers of the trustee, AND

2. Trustee was acting in the course of Proper administration of the trust

Question 3

Personal liability of trustee in tort:

Answer 3

Trustee is personally liable for all torts by trustee or trustee’s employees.

Question 4

To deal with tort liability, trustee should:

Answer 4

Buy liability insurance and charge the cost to the trust.

Question 5

Trustee can get reimbursement from the trust for any tort claims if two (2) requirements are satisfied:

Answer 5

1. Trustee must have been acting within trustee’s powers,
   AND
2. Trustee was not personally at fault.

Question 6

Trustee’s investment power:

Answer 6

Trustee must manage the property of the trust on behalf of the beneficiary, and this means the investment of the corpus of the trust.

Question 7

UPIA’s Modern Portfolio Theory of Investment

Answer 7

The trustee creates a custom-tailored investment strategy for the particular trust.

Question 8

Two things the trustee must consider in investing:

Answer 8

1. Trustee must consider the role each investment plays within the overall trust portfolio.
2. Trustee must consider the expected total return from income and capital gain.