Administration

Question 1

Trustee’s Express Powers

Answer 1

• Spelled out in the trust agreement.
• Trust can also forbid certain powers, even if they are usually implied

Question 2

Trustee’s Implied Power

Answer 2

The trustee has the power to do what is necessary or appropriate to carry out the terms of the trust

Question 3

Trustee’s Breach of Duty to Beneficiaries

Answer 3

1. Standard: Trustee must act as a reasonable and prudent investor
2. Duty to follow directions
3. Duty to Diversify
4. Duty to supervise agents
5. Duty to earmark assets
6. Avoid self-dealing

Question 4

Duty to Follow Directions

Answer 4

• Trustee has a duty to follow directions, failure to follow instructions = he is liable.
  
  • If trustee follows instructions, he is usually protected unless it’s clear that ORP would have have done what trustee did

Question 5

Duty to Diversify

Answer 5

Trustee has duty to diversify assets of the trust (unless prohibited)

Question 6

Duty To Supervise Agents

Answer 6

Duty to supervise agents

Question 7

Duty to earmark assets

Answer 7

no co-mingling trustee assets with trust assets)

Question 8

Avoid Self-Dealing

Answer 8

No personal benefit to trustee or trustee’s spouse, apart from compensation for efforts
Determined by statute

Question 9

Defenses

Answer 9

1. Earmark profits
   
   • Cannot use this excuse to offset any loss
2. Exculpatory clause
   
   • Will work
   • wIll not protect against any reckless or intentional conduct
3. Consent
   
   • Consent from a competent or informed benecificary will work, BUT
   • consent from 1 beneficiary is not consent from ALL
4. Laches
   
   • Equitable remedy; when too old to be litigated
5. With majority vote acting, a dissenting trustee will not be held liable as long as he expresses his dissent in writing to co-trustees

Question 10

Remedies

Answer 10

1. Surcharge on the trustee
2. Recission
3. Injunction
4. Removal of trustee

Question 11

Surcharge the trustee

Answer 11

Beneficiary can sue for both actual and potential lost profits

Question 12

Recission

Answer 12

Beneficiaries may rescind any unlawful transactions the trustee(s) has made

Question 13

Injunction

Answer 13

Beneficiary may seek injunction to stop improper action OR to compel trustee to perform duties

Question 14

Removal of trustee

Answer 14

• Look to the terms of the trust instrument
  
  • If terms say yes, beneficiary may remove trustee
  • if terms say nothing, beneficiaries must obtain court order

Question 15

Liability of 3rd Parties

Answer 15

If the trustee is sued for breach of contract and the third party prevails trustee must personally pay

Question 16

When is trustee entitled to indemnity or reimbursement of trust assets?

Answer 16

IF:

1. Trustee was legally valid; and
2. Breach was not caused by trustee’s breach of duty, but rather some independent party

Question 17

Tort Liability

Answer 17

• If trustee was personally at fault, he has to pay the damages
• If the trustee was NOT personally at fault he must pay damages, but gets indeminfied and reimbursed by the trustee

Question 18

Liability of Third Parties to Trust

Answer 18

• Trustee sues on behalf of the trust
• When beneficiaries can use on behalf of trust:
  
  1. Trustee fails or refuses to do it
  2. Trustee knowingly coludes with 3rd party who will be ∆
  3. Trustee has abandoned his duties and no successor has been appointed