JULY 2019 Flashcards
Did the trustee breach the duty of loyalty by renting a trust-owned apartment to himself at a market
rate?
A trustee owes trust beneficiaries a duty of loyalty.
A trustee is prohibited from making transactions that place the interest of the trustee or another above the interest of trust beneficiaries.
The duty of loyalty prohibits two types of transactions: self-dealing, where the trustee deals with trust property for the
trustee’s personal benefit, and conflict of interest, where the trustee acts on “behalf of others to whom the
trustee also owes obligations.”
“no-further-inquiry” rule, the fact that the trustee paid a market rate is irrelevant
Restatement (Third), “it is immaterial that the trustee may
be able to show that the action in question was taken in good faith, that the terms of the transaction were
fair, and that no profit resulted to the trustee.
it is voidable by the trust beneficiaries
Did the trustee breached his duty of prudent administration (a/k/a duty of care) when he failed to purchase
fire/casualty insurance on the real property.
To satisfy the duty of prudent administration, a trustee must “exercise reasonable care, skill, and caution.
The Uniform Trust Code further provides that a “trustee shall take reasonable steps to take control of and
protect the trust property
Did the trustee breached his duty to administer the trust in accordance with applicable law by allocating the
$50,000 repair expense exclusively to income.
A trustee has a duty to administer the trust “diligently and in good faith, in accordance with the terms of the trust and applicable law.”
Under the Uniform Principal and Income Act, “all . . .ordinary expenses incurred in connection with the . . preservation of trust property . . . including ordinary repairs” are allocated to income. Extraordinary repairs are allocated to principal
Vested remainders are devisable. Thus, if the remainderman is not living when the remainder becomes possessory, it passes to the devisee of the interest under the deceased remainderman’s will
If Betty’s trust interest were subject to a survivorship contingency, that would have caused Betty’s interest to fail because she predeceased Albert. In that case, her interest would have reverted to the testator’s estate. In such case, it would have passed to his heirs if he died intestate or to his beneficiaries if he died with a will.]
