Part III: Trust Administration

Question 1

What two are the two sources of the trustee’s power?

Answer 1

express and implied.

Question 2

How are express powers granted?

Answer 2

1. granted by settlor in trust instrument
2. provided by state statute
3. decreed by court

Question 3

How are implied powers granted?

Answer 3

necessary or appropriate to carry out terms of trust if not expressly forbidden by trust.

Question 4

If there are multiple trustees, is unanimous consent required for the exercise of trustee powers?

Answer 4

No, usually a majority is fine.

Question 5

when the trustee has discretionary powers, what liability do they face for their decisions?

Answer 5

only in breach if decision is an abuse of discretion or if the trustee fails to exercise discretion.

Question 6

What duties does the trustee owe the trust?

Answer 6

1. general standard of care -
   care and skill of prudent person;
   -insulate trust property (label trust property and keep separate)
2. duty of loyalty (no self-dealing)
3. keep accurate records and render accounting on demand

Question 7

What is the investments SOC?

Answer 7

prudent investor. also, settlor is free to limit or expand the types of investments which the trustee may make or change the default standard

Question 8

Factors the trustee must consider when making investments:

Answer 8

1. trust purposes
2. trust terms
3. distribution requirements
4. other circumstances

Question 9

What is the “portfolio approach”

Answer 9

look at all investments together. allows for prudent ant of speculation

Question 10

What is the general rule about diversification?

Answer 10

It’s REQUIRED.

Except: when trustee reasonably determines that because of special circumstances the purposes of the trust are better served without diversifying.

Question 11

What standard is a trustee with special skills or expertise held to?

Answer 11

a higher standard.

Question 12

to whom is the duty of loyalty owed?

Answer 12

the beneficiaries.

Question 13

Can a trustee delegate his duties?

Answer 13

only if a prudent trustee of comparable skills could properly delegate under the circumstances.

Trustee must use reasonable care in:
selecting the agent
establishing the scope and terms of the delegation, and
periodically reviewing the agent’s decisions

Question 14

Will trustee be liable for the delegatee’s decisions or actions?

Answer 14

Not if the delegation is proper.