Liability of Trustee in Contract and Tort Flashcards
When is a trustee personally liable in a contract?
Unless the K explicitly shields trustee from liability, the trustee is personally liable to 3rd parties on contracts trustee entered into related to the trust property.
What happens if the trustee IS found liable for a contract breach, can they be reimbursed?
Trustee will be reimburse IF:
- the K was within the powers of the trustee AND
- The trustee was acting in the course of proper administration
When is trustee personally liable for torts?
Trustee is personally liable for ALL torts by the trustee or trustee’s employees.
Can you charge the cost of liability insurance to the Trust?
YES.
When can the trustee get reimbursed from a tort claim?
- Trustee must have been acting within trustee’s power, only taking on risks that are a normal incident of proper trustee conduct AND
- Trustee was not personally at fault.
Trustee’s emplyee was negligently driving a truck carrying trust files to a storage place when he collided with P’s car. P was injured, and court awarded him $1 million. Trustee reimbursed?
Yes, within scope and T not personally liable.
Trustee’s was negligently driving a truck carrying trust files to a storage place when he collided with P’s car. P was injured, and court awarded him $1 million. Trustee reimbursed?
NO. Trustee personally liable, NO reimbursement.
What is Trustee’s investment power?
Trustee must manage the property of the trust on behalf of the beneficiary, and this means the investment of the corpus of the trust.
What is the Uniform Prudent Investor Act?
relevant statute, gives broad latitude to trustees to choose investments.
What can trustee pursue via the UPIA?
Can pursue the modern portfolio theory of investment, where the trustee creates a custom-tailored investment strategy for this particular trust.
What are two key factors to remember?
- Trustee must consider the role each investment plays within the overall trust portfolio
- Trustee must consider the expected total return from income and capital gains
Does the trustee have to justify each investment?
NO, can balance off risky speculative investments against safe conservative investments, don’t need to explain each decision.
Is Prudence measured by hindsight?
NO., look at it when decision was made.
What kind of adjustment power can trustee exercise?
Trustee can switch capital gains into the income category if necessary to protect the income beneficiary and visa vera.
End goal is fairness to all beneficiaries.
What is the key to UPIA?
Flexibility to shape the investment strategy for the maximum total return, along with the flexibility to adjust income between the income and remainder beneficiaries to be fair ro each of them.
