Section III. Fiduciary Responsibilites Flashcards
- Under what circumstances will a trustee be deemed to have been granted a discretionary power?
a. If the terms of the trust or state law grant the power
b. If all beneficiaries consent to the exercise of the power
c. If a court order grants the power
d. All fo the above
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- When will a court interfere with a trustee’s exercise of a properly granted discretionary power?
a. When the trustee has abused its discretion or acted in bad faith
b. When a trustee makes an investment that generates a loss
c. When a trustee is also a beneficiary, regardless of weather the trustee abused its discretion or acted in bad fath
d. All of the above
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- Under what circumstances may a trustee delegate one of its powers?
a. When the trustee agrees to pay a reasonable fee to its agent
b. When the trustee delegates to a beneficiary
c. When a trustee is authorized by the terms of the trust, state law, or the beneficiaries
d. When the trustee is also the settlor of an irrevocable trust
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- What are the trustee’s duties when delegating its authority to an agent?
a. The trustee must use the highest standard of care when selecting the agent
b. the trustee must use the highest standard of care when selecting and supervising the agent
c. The trustee must use reasonable care when selecting and supervisiong the agent
d. The trustee owes no duties when delegating its authority to an agent
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- At common law, _________ of the acting co-trustees are required to act on behalf of the trust:
a. A majority
b. At least one
c. All
d. None
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- Matilda is 88 years old, but her mind is still sharp. She has been a widow for nine years following the death of her husband, Herbert. Income from a substantial marital trust created by Herbert has provided Matilda with ample comfort and support. Matilda is co-trustee with Fly-by-Night State Bank of a credit shelter trust also created under Herbert’s will. The will requires that the co-trustee of the credit shelter trust distribute income and principal to Herbert’s descendants as needed for their health, support, and education. A trust officer from Fly-by-Night convinces Matilda to delegate all of her invesment power as co-trusee of the trust to the bank. Matilda, well aware of Herbert’s enthusiasm during his lifetime for the bank’s invesment skills, reluctantly agrees. The bank then invests the property of the credit shelter trust imprudently. Herbert’s descendants, who are not very nice, sue Matilda and the bank for the loss to the trust. What is the possible legal theory underlying the descendants’ suit against Matilda?
a. Breach of duty of care due to Matilda’s failure to supervise the co-trustee bank
b. Breach of duty of care due to Matilda’s failure to invest trust assets herself
c. Breach of duty of care due to Matilda’s failure to resign as trustee because of her age and to appoint a younger trustee
d. Breach of duty of loyalty due to Matilda’s failure to get the descendants’ consent before delegating investment power to the bank
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- Which of the following legal actions against a trustee are available to the settlor of a trust?
a. The settlor can attack the validity of the trust
b. The settlor can sue the trustee to enforce the terms of the trust
c. The settlor can sue the trustee for breach of fiduciary duty
d. The settlor can petition for the removal of the trustee
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- Which of the following is not one of the legal and equitable remedies available to beneficiaries against a trustee who commits a breach of trust?
a. Reduction of the trustee’s compensation
b. Termination of the trust
c. Removal of the trustee
d. Injunction against the trustee’s wrongful actions
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- Upon whom may liability be imposed under CERCLA?
a. The current owner of contaminated property
b. A prior owner who owned the property while hazardous substances were disposed of
c. Anyone who arranged for disposal, treatment, or transport of hazardous substances
d. All of the above
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- Under CERCLA, must the environmental liability of a fiduciary be based upon direct ownership or operation of contaminated property?
a. Yes
b. Yes - but only if the fiduciary is the operator of the property
c. Yes - but only if the fiduciary is the owner of the property
d. No - indirect ownership or operation may support liability
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- When may a fiduciary be personally liable under CERCLA? That is, when may fiduciary’s CERCLA liability reach beyond the assets held in a representative capacity?
a. At any time
b. Never
c. When a fiduciary neglegently causes contamination
d. When the contamination results in a loss in the value of the trust assets
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- The trustee has which of the following duties:
a. An affirmative duty to provide information to the trust beneficiaries regarding the nature and amount of trust property
b. Are duty to get beneficiaries’ consent before taking compensation
c. A duty to provide regular accountings to the nearest state ccourt with general jurisdiction
d. A duty to notify beneficiaries int he event of the sale of a trust asset
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- Which of the following trustees has a fiduciary duty of care that is higher than the standard of ordinary prudence:
a. A trustee who is one of several beneficiaries
b. A corporate trustee appointed due to its expertise
c. A trustee who has not posted a bond
d. None of the above - all trustees must meet only the standard of ordinary prudence
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- A trustee must treat all trust beneficiaries _________.
a. Equally
b. Impartially
c. Respectfully
d. In the same manner as the grantor treated the beneficiaries
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- What are the trustee’s responsibilities when transacting business with the trust beneficiaries?
a. The trustee must act faily and communicate all material facts.
b. The trustee must conduct the transaction through a neutral third party
c. The trustee may conduct the transaction without any special limitations
d. The trustee must get the prior consent of all trust beneficiaries
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