Has Trustee taken action? Flashcards
What are the trustee’s limitations in maintaining trust purpose?
Trustee has:
(a) express limitations - conferred in the trust instrument, state law, and court order, and
(b) implied limitations - broad powers as necessary to carry out the trust terms and promote beneficiary’s interest.
What is trustee duty of good faith?
A trustee must administer the trust in good faith in “accordance with trust purpose and terms, in the best interests of the trust beneficiaries.”
What is the trustee’s duty of loyalty?
In all matters relating to the trust, the trustee must put the interest of the beneficiaries first.
What is a breach of loyalty by self dealing?
Trustee must (1) not to use trust advance own interests or (2) pursue conflicts of interest.
What are specific examples of self dealing?
1) Buying trust assets, 2) selling to another trust managed by trustee, 3) borrowing from or loaning to trust, 4) personal gains (other than fees), 5) securing personal loan.
What remedies are available for breach of duty of loyalty for self dealing?
Beneficiary may (1) set aside transition, (2) surcharge (recover any profit from trustee), (3) affirm trustee actions (waive breach if positive outcome), or (4) recover property (unless Bona-Fide Purchaser)
What is the trustee’s duty of due care?
A trustee must (1) exercise care, skill and caution that would be exercise by a reasonably prudent person, in managing the trust. (2) Mistakes in judgment do not expose trustee liability so long as reasonable care was exercised.
What is the prudent investor rule under duty of due care?
Trustee must act prudently and reasonably in managing the interests of the trust, as a prudent investor “would as if it were his own.” A trustee must “diversify assets and protect from devaluation.”
What remedies are available if trustee breaches duty of due care?
Trustee is liable for any resulting loss if he has breached duty of care.
What is the trustee’s duty to earmark?
Trustee must identify, separate and account for assets, and not commingle trust assets with own.
What is the trustee’s duty to personally perform? (delegation)
Trustee must not delegate trust duties (unless it would be unreasonable to do personally).
Modernly, a trustee may delegate investment and management. Must use reasonable care, skill, and caution to select agent, establish scope, and periodically monitor agent actions.
What personal liability is there for trustee regarding contract with third parties?
Trustee may be personally liable to a third party on a contract (can be reimbursed by trust if contract was for trust, done w/ reasonable prudence)
What persona liability is there for a trustee for torts inflicted in course of trusteeship?
For torts (can be reimbursed if not personally at fault and incidental to trust activity) in course of trust administration.
