Liability of Trustee in Contract & Tort

Question 1

When does the trustee have personal liability in contract?

Answer 1

A trustee is PERSONALLY liable on all Ks w/ third persons entered into on behalf of the trust UNLESS the contract relieves her of liability by being signed ONLY ON BEHALF OF THE TRUST (not personally and merely mentioning the trust).

EX. NO PERSONAL LIABILITY-

• “JJ Trust, by Mary, Trustee”
• “Mary, as Trustee of the JJ Trust and not individually”

EX. PERSONAL LIAB-
- “Marry, Trustee of the JJ Trust.”

Question 2

When is the trustee entitled to indemnification after being found personally liable in contract?

Answer 2

IF:
1- contract was w/in the powers of the trustee; AND
2- trustee was acting in the course of proper administration of the trust

Question 3

When is trustee personally liable in tort?

Answer 3

ABSOLUTE RULE- trustee is personally liable for ALL torts by trustee or trustee’s employees committed in the course of administration of the trust. NO EXCEPTIONS

Note: this rule means trustee should buy liability insurance and charge the cost of it to the trust

Question 4

When can trustee get reimbursement for tort claims?

Answer 4

IF:
a- liability was incurred in the course of proper administration of the trust; AND
b- trustee was not personally at fault