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CTFA > Fiduciary and Trust #3 Fiduciary Responsibilities > Flashcards

Fiduciary and Trust #3 Fiduciary Responsibilities Flashcards

1
Q

Standard of care: Active vs passive trustees

A

All trustees s/b active participants in trust management

All co-trustees must exercise same degree of care that a reasonable person would in the conduct of their own affairs

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2
Q

Passive trustees

A

Exercise due care in delegation of trust responsibility

Supervise and inspect work of active trustee

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3
Q

Active trustee to passive trustee

A

Keep each trustee informed of all material facts re: trust operation

Access to all records unless restricted by settlor

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4
Q

Express power

A

Power granted to trustee by express terms of trust or applicable statute

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5
Q

Implied power

A

Trust document and statute silent regarding power

Trustee looks to court for guidance or beneficiaries for consent

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6
Q

Absolute trustee discretion

A

Expressly granted by settlor

Trustee has great freedom

Under UTC, trustee has obligation to exercise absolute discretionary powers
In good faith
Accordance with trust terms and purpose
In the best interests of beneficiaries

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7
Q

Discretionary powers

A

Courts look at reasonableness of trustees actions

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8
Q

Can power be delegated

A

1). Look to trust to see if power is delegate
2). Applicable statutes-both Restatement and UTC allow delegation if it is prudent, handled with care and properly monitored
3). If all silent, look to beneficiaries for consent or court order

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9
Q

Ordinary delegations

A

Use of broker
Use of appraiser
Use of property manager
Use of proxy for voting

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10
Q

Delegation Duty of Care

A

Reasonable care when selecting agent

Provide adequate instruction

Proper supervision and evaluation of performance

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11
Q

Trustee liability for delegation

A

Trustee is liable to beneficiary for any losses attributable to delegation

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12
Q

Common Law Fiduciary Duties

A
  1. Must administer the trust
  2. Duty of loyalty to beneficiaries and act solely in their best interest
  3. Cannot delegate to others a duty they can reasonably perform
  4. Keep and render clear and accurate accountings
  5. Provide information to beneficiaries regarding nature and amount of trust property
  6. Exercise care and skill equal to reasonably prudent person would with their own property
  7. Maintain control of trust property
  8. Preserve trust property
  9. Enforce trust claims and defend trust against loss
  10. Segregate trust property
  11. Exercise reasonable care to make trust property productive
  12. Deal impartially with beneficiaries
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13
Q

Who enforces trust terms

A

Beneficiaries and trustee

NOT SETTLOR

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14
Q

To whom does trustee owe duty in irrevocable trust

A

Beneficiaries.

Once created settlor has no legal relationship with trustee or beneficiaries. Settlor has no rights, powers, liabilities

Can attack validity and recover property if proven trust created under duress

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15
Q

Can settler reserve any powers in irrevocable trust?

A

Yes. Settler may reserve and enforce specific powers and rights

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16
Q

Trustee duty to bring action

A

Trustee must bring action against third party who
1) interferes with operation of trust or
2) injures or destroys trust property

17
Q

No duty to bring uncertain or unreasonable claims

A

Reasonable claim cannot be collected in full
Doubtful that claim is enforceable

18
Q

Duty to defend

A

Trustee has duty to defend actions that may result in loss unless it is not reasonable to make defense

19
Q

Duty to appeal

A

Trustee IS under duty to beneficiary to appeal to higher court unless unreasonable todo so

20
Q

Does trustee have liability for breach of trust for depreciation of trust assets

A

No - if trustee has exercised due care and skill in administering trust

21
Q

What must trustee do if breach of trust

A

Restore principal to value it would have been if not for breach of trust
Restore distributions beneficiary would have received
Repay any amount that trustee personally benefitted from breach

22
Q

Trustee may be held liable for acts of

A

Co-trustee
Agent of trustee
Officer or employee of corporate trustee

23
Q

Nonjudicial settlement agreement

A

Contract between trustee and beneficiary used to:

Agree to particular interpretation of trust language
Approve accounting
Direct trustee to retrain from particular out
Grant trustee certain power
Modify trust terms, in certain situations

24
Q

Notice of terminating distribution

A

UTC permits trustee to reduce berficiaries time to object to proposed final distribution to 30 days

25
Q

Consent, release, ratification by beneficiary

A

UTC relieves trustee of liability from breach if beneficiary consented to breach and had all material facts

26
Q

Safekeeping of assets

A

Trustee and personal rep have duties to control and protect trust /estate assets

Repair

Segregate

Take possession and control

27
Q

RUFADAA

A

Revised uniform fiduciary access to digital assets act

Extends fiduciary’s power to manage tangible property to digital assets

Computer files, websites, digital currency -yes

Email, text messages, social media accounts-no

28
Q

Environmental liability

A

Corporate trustees liable, sometimes personally ) for cost of environmental cleanup of properties they hold primary source of liability is CERCLA- comprehensive environmental response compensation liability act

Current owner
Owner @ time of contamination
Party that arranged for transport of hazardous substances * GENERATOR
Party that accepted materials * TRANSPORTER

29
Q

Hazardous substance

A

Any substance defined as hazardous under either CERCLA or other federal environmental law

30
Q

Reg 9.2 definition of applicable law

A

State law governing bank fiduciary relationships
Applicable federal law
Trust terms
Any court order relating to relationship

31
Q

Fiduciary standard

A

Investment Advisers 1940 Act = duty of loyalty and duty of care

SEC Regulation Best Interest (Reg BI) =

Uniform Trust Code =

32
Q

Suitability vs Fiduciary Standard

A

Suitability = advisors must make investment recommendations that are appropriate for clients: age, financial goals, risk tolerance. LOWER STANDARD THAN FIDUCIARY

Fiduciary = advisors must act in their clients best interest ahead of their own

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