Fiduciary Duties Flashcards
Trustee Powers
- Espressly granted in the trust
- Powers necessary to act as a reasonably prudent person in managing the trust
- Power to contract
- Power to sell
- Power to lease
- Power to transfer
Trustee Duties
- Duty of Loyalty
Duty of Loyalty - Generally
- Duty to administer in good faith (subjective standard) and to act reasonably (objective standard)
Duty of Loyalty - Specific Duties
- No self-dealing
- No conflicts of interest
Self-Dealing
When a trustee engages in transation involving trust property.
Prohibited Transactions:
* Buying/selling trust assets
* Selling property between trust that trustee manages
* Borrowing from or making loans to trust
* Using trust assets to secure personal loans
* Engaged in prohibited transactions with friends/relatives
* Otherwise acting for personal gain through trustee position
Irrebuttable presumption that trustee breached duty of loyalty if self-dealing is an issue
Per se breach - no furhter inquiry is required and reasonablness or good faith doesn’t matter
Self-dealing Exceptions
- Even when authorized, must still be reasonable and fair to avoid liability for breach
Self-Dealing Remedy
Beneficiaries may
* Set aside the transaction; or
* Ratify transaction and recover the profits
Conflict of Interest Issues
- Trustee invests in company they have interest in
- Presumption of breach of DoL that can be rebutted if trustee can demonstrate the transaction was fair or would have been made by an** independent party**
Duty of Prudence
- Prudent investor Rule
- Duty to Diversify
- Duty to Make Property Productive
- Duty to be Impartial
Prudent Investor Rule
- Act as a prudent investor would act when investing own property
- Exercise reasonable care, caution, and skill when investing/managing trust assets
Dute of Prudence
Duty to Diversify
Adequetly diversify to spread risk of loss - invest in multiple, not just one
Duty of Prudence
Duty to Make Property Productive
Investments as well as property owned by trust
Duty of Prudence
Rent rental properties
Duty to be Impartial
- Balance interests of present and future beneficiaries
- Treat present beneficiaries equally unless trust directs otherwise
- Ordinary expense - trust income
- Extraordinary expense - trust principal
Duty of Prudence
Duty to Disclose
Dislose complete and accurate information
Allow access to trust records and accounts
Duty to Account
Periodically account for actions taken on behalf of trust
Powers of Appointment
Trustee with PoA gets the power to distributed the trust property
“to my son Mark, for life, and to distribute the principal upon Mark’s death to any or all of his children as he appoints by will”
” if no valid appointment, then to Law School”
Mark has special power of appointment. If he apoints to wife, it goes to law school
General Power of Appointment
Can give the property to anyone
Special/Limited Power of Appointment
Must give property to specific person
