Remedies

Question 1

If a trustee commits a breach of their duties, to whom is he/she liable?

Answer 1

The Beneficiaries, not the Settlor

Question 2

If a trustee commits a breach of their duties, what must they pay?

Answer 2

The Greater of:

• The amount needed to RESTORE the trust property and distributions to what they would have been without the breach

AND

• Account for the Trustee’s profit from the breach

Question 3

If a trustee is surcharged, what might they be liable to pay to the beneficiaries?

Answer 3

Lost profits, even if the investments were prudent/no breach

Depreciation of assets

Trustee liable for any profits they earn

Question 4

What 3 options do the beneficiaries have if the trustee self-deals with trust property?

Answer 4

1. Affirm the transaction
2. Set aside the transaction
3. Trace the profits

Question 5

When might an exculpatory clause in a trust be void?

Answer 5

1. If it relives the trustee for breaches committed in BAD FAITH
2. Relieves the trustees if they act with RECKLESS INDIFFERENCE
3. They’re included in the trust document because of an abuse of the confidential relationship with the settlor

Question 6

In which 4 circumstances will the trustee not be liable for the breach of their duties?

Answer 6

• Beneficiaries consented to the conduct
• Beneficiaries releases the Trustee from liability
• Beneficiaries ratified the transaction
• Trustee after in reasonable reliance on the terms of the trust.

Question 7

If the trust doesn’t contain information on how to remove a trustee, what will be beneficiaries need to do?

Answer 7

Go to court to get the trustee removed.

Question 8

In what circumstances can the beneficiary seek to remove the trustees?

Answer 8

Incapacity

Unfit (drug abuse or convictions of crime)

Serious breach of duty

Serious conflict of interest

Insolvent

Extreme hostility between trustee and beneficiaries

Refusal to account

Refusal to post any required bond

Question 9

In which circumstances could a trustee be liable to a third party?

Answer 9

Under contract

Tort liability

Question 10

If a trustee signs a contact on behalf of the trust, will they be personally liable for the contract?

Answer 10

Yes

Unless they sign “as trustee”

Question 11

If the trustee is bound under contract because they entered into it on behalf of the trust, can they seek indemnification it reimbursement from trust property?

Answer 11

Yes, if the contract was properly entered into for the trust and trustee is not in breach of his duties.

Question 12

What is the Common Law vs. Uniform Trust Code position when it comes to the trustee’s tort liability?

Answer 12

Common law = trustee liable for own acts and acts of employees/agents due to vicarious liability

UTC = trustee liable only for personal fault