Duty of Loyalty

Question 1

Duty of Loyalty

Prohibits

Answer 1

self-dealing, including any conflict of interest

Question 2

Duty of Loyalty

extends to the

Answer 2

trustee and the trustees close family members and the representative of the trustee

Question 3

UTC 802 Duty of Loyalty

A trustee should administer the trust solely in the interest of the beneficiaries:
- Subject to the rights of persons dealing with or assisting the trustee as provided in section 1012:

Answer 3

A sale, encumberance, or other transaction

involving the investment or management of trust property

entered into by the trustee for the trustees own personal account or which is otherwise offered by a conflict between the trustee’s fiduciary and personal interests

is voidable by a beneficiary affected by the transaction

Question 4

UTC 802 Duty of Loyalty

A trustee should administer the trust solely in the interest of the beneficiaries:
- Subject to the rights of persons dealing with or assisting the trustee as provided in section 1012:
- A sale, encumberance, or other transaction involving the investment or management of trust property entered into by the trustee for the trustees own personal account or which is otherwise offered by a conflict between the trustee’s fiduciary and personal interests is voidable by a beneficiary affected by the transaction UNLESS:

(5)

Answer 4

1. The transaction was authorized by the terms of the trust
2. the transaction was approved by the court
3. the beneficiaty did not commence a judicial proceeding within the time allowed by section 1005
4. the beneficiary consemted to the trustee’s conduct, ratified the transaction, or released the trustee in compliance with section 1009, OR
5. the transaction involved a contract entered into or claim acquired by the trustee before the person became or contemplated becoming trustee

Question 5

UTC 802 Duty of Loyalty

A sale, encumberance, or other transaction involving the investment or management of trust property is presumed to be affected by a conflict between personal and fiduciary interests if it is entered into by the trustee with:

(4)

Answer 5

1. the trustee’s spouse
2. the trustee’s descendants, siblings, parents, or their spouses,
3. an agent or attourney of the trustee, or
4. a corporation or other person or enterprise in which the trustee, or a person who owns a significant interest in the trustee, has an interest that might affect the trustee’s best judgement.

Question 6

UTC 802 Duty of Loyalty creates some exceptions to the duty of loyalty: a self-dealing transaction is allowed if

Answer 6

1. the transaction was authorized by the terms of the trust instrument
2. apporved by a court, or
3. authorized by the beneficiary

Question 7

UPC limit for the beneficiary to file an action

Answer 7

there is a time limit

Question 8

UTC 802 Duty of Loyalty creates a presumption of conflict, which

Answer 8

a trustee can rebut by showing an absense of conflict

Question 9

UTC 802 Duty of Loyalty codifies that a trustee can charge

Answer 9

fees for acting as trusee

Question 10

UTC 802 Duty of Loyalty

An investment by a trustee in securities of an investment company or investment trust to which the trusee, or its affilate, provides

Answer 10

services in a capactiy other then as trustee, is not,
presumed to be affected by a conflict between personal and fiduciary interests, if the investment otherwise complies with the pruduent investor rule of article 9

Question 11

UTC 802 Duty of Loyalty

In addition, to its compensation, for acting as trustee, the trustee may be compendated by

Answer 11

1. the investment company or investement trust
2. for providing those services out of fees charged to the trust

Question 12

UTC 802 Duty of Loyalty

If the trustee recieves compensation from the investment company or investment trust for providing investment advisory or investment management services, the trustee must at least

Answer 12

• annually notify the persons entitled under section 813
• to recieve a copy of the trustee’s annual report of the rate and method by which that compensation was determined

Question 13

UTC 802 Duty of Loyalty

In voting shares of stock or in exercising powers of control over similar interests in other forms of enterprise, the trustee shall act in

Answer 13

the best interests of the beneficiaries

Question 14

UTC 802 Duty of Loyalty

If the trust is the sole owner of a corperation or other form of enterprise

Answer 14

the trustee shall elect or appoint directors or other managers
- who will manage the corperation or enterpise in the best interests of the beneficiaries

Question 15

UTC 802 Duty of Loyalty

This section does not provide the following transactions, in fait to the beneficiaries:

(5)

Answer 15

1. An agreement between a trustee and a beneficiary relating to the appointment or compensation of the trustee;
2. paymnet of reasonable compensation to the trustee,
3. A transaction between a trust and another trust, decedent’s estate, or conservatorship of which the trustee is a fiduciary or in which a beneficiary has an interest,
4. a deposit of trust money in a regulated financial service institution operated by the trustee
5. an advance by the trustee of money for the protection of the trust

Question 16

If the trustee wants to do something that looks like self dealings, what should he do?

Answer 16

1. get permission from beneficiaries
2. get permission from the court
3. look and see if it is authorized in the trust instrument

Question 17

Investment of treasury bonds

Answer 17

less risk/no risk

Question 18

Principal

Answer 18

Assets itself
(ex. stock) (property)

Question 19

Income

Answer 19

reciepts
(ex. dividends) (rent)