Fiduciary Duties of Trustee

Question 1

Duty of Loyalty

Answer 1

Cannot enter into any transaction in which she is dealing with trust in her individual capacity.

Question 2

Under Duty of Loyalty a Trustee May Not

Answer 2

buy or sell trust assets, even if fair; sell property of one trust to another; not borrow trust funds nor loan her personal funds (any interest paid on such loan must be returned to trust), cannot use trust assets to secure personal loan, cannot personally gain, cannot invest trust property in its own stock

Question 3

If Prohibited Transaction Occurs Beneficiary Can

Answer 3

set aside transaction; recover any profit made by trustee; OR affirm transaction

Question 4

Duty to Earmark

Answer 4

Trustee must keep personal assets apart from trust assets.

Question 5

Investments

Answer 5

If trust states investments are made at discretion of trustee, look to whether state has:

Prudent Investor; only prudent investments are permissible.

Legal List Jurisidiction: trust language giving the trustee broad discretion is likely to free trustee from list

Question 6

Statute of Limitation On Trustee’s Actions

Answer 6

Begins to run once: trustee repudiates the trust, by denying existence of trust as to the particular asset OR dies/resigns OR gives account and makes full disclosure of facts which action would be based.