Liability of Trustee in Contract and Torts

Question 1

When is a trustee personally liable in contract?

Answer 1

When he signed a contract personally, without clear indication that he was signing on behalf of the trust

Question 2

If a trustee is personally liable on a contract, can the trustee be reimbursed by the trust?

Answer 2

Yes, if:

1. The contract was within trustee’s powers; and
2. Trustee was acting in proper course of administration

Question 3

Is a trustee personally liable for all his torts committed while acting as trustee?

Answer 3

Yes, as well as for the torts of his employees

Question 4

How does a trustee protect himself from tort liability?

Answer 4

Buying insurance (charging the cost to the trust)

Question 5

Can a trustee be reimbursed by the trust for any tort claims?

Answer 5

Yes, if:

1. Trustee was acting within his power; and
2. Trustee was not personally at fault

Question 6

What is the Uniform Prudent Investor Act

Answer 6

Statute adopted in NY giving more latitude to trustees

Question 7

What is the modern portfolio theory of investment?

Answer 7

Requires a custom-tailored investment strategy for each trust

Question 8

What are the two most important factors to consider when making investment decisions for a trust?

Answer 8

1. The role each investment plays in the trust

2. Expected total return from income and capital gain

Question 9

How does a trustee justify his investment decisions?

Answer 9

By looking at the portfolio as a whole and not each transaction in isolation. Balance the risky with the conservative

Question 10

What time does the court look to when gauging the prudence of the trustee’s investment decision?

Answer 10

The time when the investment was made, not how they later turned out

Question 11

What is the key to remember under UPIA?

Answer 11

The trustee has flexibility