Trust Admin

Question 1

Power

Answer 1

expressly from trust and implied to accomplish purpose

Question 2

Joint trustee

Answer 2

unanimous but if more than 3- majority

Question 3

Imperative v Discretionary

Answer 3

Imperative- trust requires it

Discretionary- may or may not perform

Question 4

Duty of Loyalty

Answer 4

Undivided Duty of Loyalty - reasonably prudent person

Can’t represent both personal interests and the interest of the trust (self dealing)

Remedy- recover profits from; affirm transaction; set aside transaction

Question 5

Separate and Earmark

Answer 5

Assets must be kept physically separate from personal assets (no commingling)

Remedy- liable for all losses and increase in value of commingled funds goes to trust

Question 6

Perform Personally

Answer 6

Reasonably prudent person- can’t delegate what a reasonably prudent person wouldn’t delegate

Remedy- trustee is liable for the actual loss to trust

Question 7

Preserve and make a trust property productive

Answer 7

must use reasonable care to invest, collect, lease, manage, record, pay taxes, and secure insurance

Remedy- liable for losses from breach and for any profit that would have accrued

Question 8

Investments

Answer 8

Legal lists
permissive- can invest outside of list
Mandatory- probably breach if invests outside

Question 9

Types of investments

Answer 9

Proper: productive land; mortgage participations, common trusts, mutual funds,

Improper: unsecured loans; second mortgages; common and preferred stock; unproductive land

Question 10

Exculpatory clauses

Answer 10

Clauses attempting to relieve a trustee of liability- strictly construed but are enforceable if: no bad faith; no recklessness; no there because of trustee’s abuse

Clauses absolving trustee from all liability are void

Question 11

Liability to 3rd parties

Answer 11

Contacts- trustee personally liable

Tort- liable if committed in course of trust admin

Question 12

BFP

Answer 12

BFO- cuts off benny’s equitable interest (acquires property with value without notice

Question 13

Direct suits

Answer 13

Only trustee can sue against 3rd parties

Bennies can bring a suit in equity compelling trustee to sue unless trustee participated in breach; has left the jurisdiction; fails to sue a 3rd P personally liable

Question 14

Adjustment Power

Answer 14

Power to reallocate investment portfolio

Authorizes the trustee to characterize items such as capital gains, dividends, etc as income

Question 15

Receipts as Income

Answer 15

Ordinary receipts (rents, interest); cash dividends; proceeds from contract insuring trustee against loss; 10% of pension plan; 10% patents and copyrights; 10% working interest (oil/gas)

Expenses: 50% regular comp. from any personal investment; 50% all expenses for accounting, judicial proceedings; ordinary expenses; insurance premiums

Question 16

Receipts as principal

Answer 16

Extraordinary receipts; stock dividends; proceeds from life insurance policy; 90% of payment from pension plan; 90% proceeds from copyrights and patents; 90% proceeds from working income

Expenses:
50% of regular compensation; 50% all expenses from accounting and judicial proceedings; expenses of a proceeding that concerns a principal interest; payment on the principal of a trust debt; estate taxes; disbursements related to environmental matters