Trust administration Flashcards
trustee’s power
(1) powers expressly conferred upon her by the terms of the trust
(2) powers that an unmarried individual has over their own property
(3) powers that are appropriate to achieve the proper investment, management, and distribution
(4) powers conferred upon her by the UTC-
duties of the trustee
- duty to administer
- duty of loyalty
- duty to report
- duty to separate trust property and keep records
- duty to enforce claims and defend trust from attach
- duty to preserve trust property and make it productive
duty to administer
good faith and purdent manner
if special skill or expertise she will be held to higher standard
more than one beneficiary- act impartially
duty of loyalty
(1) cannot buy or sell trust assets
(2) may not sell the property of one trust to another trust of which also trustee
(3) may not borrow trust funds or loan her personal funds
(4) cannot use trust assets to secure a personal loan
(5) cannot personally gain
(6) corporate trust cannot invest in its own stuct- but can retain it
(7) self-employment
commingling of trust property
if commingles trust property with own property- losses are charged to trustee and gains are credited to trust
must separate and earmark
trustee must report
respond to beneficiaries request and provide an annual accounting
preserve and make trust property productive
must use reasonable care to invest the property- prudent investor rule, collect claims dut, lease or manage, record documents, pay taxes, etc.
remedies for breach of trust
(1) enforce specific performance
(2) enjoin trustee from committing a breach
(3) compel trustee to pay money or restore property
(4) suspend or remove trustee
trustee not liable for breach if
(1) acted in reaeaonble reliance on terms of trust OR
(2) beneficiary consented, released, or ratified AS LONG AS not improperly induced
exculpatory clauses for trustee
void if they (1) releive trutee of liability for breach of trust committed in bad faith or with reckless indifference OR (2) appear in trust instrument because trustee’s abuse of confidential relationship with settlor
pour over gift from will to revocable trust
allowed if will is established during lifetime
may remain unfunded during lifetime - but must be clearly identified from language in the will
totten trust
bank account depositor declares himself trustee of the account for a person who is to receive the money in the account at the time of the depositors death
how is a toten trust revoked
(1) the withdrawal of funds,
(2) any lifetime act manifesting the intent to revoke, and
(3) specific contradictory provision in a will
what is a constructive trust
flexible equitable remedy to prevent unjust enrichment resulting from wrongful conduct
constructive trustee’s duty
to convey the property to the person who would have owned it but for the wrongful conduct - the beneficiary
account for profits taken and/or fair rental value of his use of it
breach of promise
generally will not raise a constructive trust UNLESS
- fraudulent promise
- breach of promise by one in a confidential relationship
- breach of promise by the decedent’s devisee or heir to hold property for benefit of a third person
- breach of promise by the decedent
- breach of promise to the debtor by the buyer at the foreclosure sale
beneficiary identification
need not be identified at time a trust is created but must be susceptible of identification by the time their interests are to come into enjoyment
beneficiary class
allowed but the class must be sufficiently definite
settlor may allow trustee dsicretion to select class members as long as class if reasonably definite.
over broad class
trust (or a portion) wil lbe invlaid
effect of lack of beneficiary
trust (or a portion) is a resulting trust in favor of the settlor or the settlor’s successors in interest is presumed
cy pres doctrine
applies when a specific charitable purpose indicated by the settlor is no longer possible or practical, AND settlor manifested a general charitable intent
UTC- general charitable intent
presumed and application of cypres is MANDATORY
cy pres effect
court can direct that the trust property be applied to another charitable purpose as close as possible to the original one rather than letting trust fail and become a resulting trust
when does a class close
when some member of the class can call for a distribution of her share of the class gift
Possession and enjoyment of trust postponed
i.e.- gift follows life estate- the class remains open until the time fixed for distribution- death of life tenant
Requirements of survival of class members
generally not required UNLESS express trust terms state otherwise
Trust antilapse statute
Generally they do not apply
UPC and some states have allowed anti-lapse statutes which allows a class trust described as children- to pass to the predeceased childs children
duty to preserve and make productive
reasonable care with respect to trust property meaning investing trust funds within a reasonable time and selling and reinvesting as needed
lease land, collect claims, invest money
Uniform Prudent investor Act (UPIA)
trustee must invest and manage trust assets as a prudent investor would, taking into account the purposes, terms, distribution requirements, and there circumstances of the trust
Duty to diversify
trustee has a duty to diversify investments unless there are special circumstances indicating the trust purposes would be better served without diversification
duty to report
MUST (1) provide qualified beneficiaries with her name, address, and telephone number; (2) respond to requests for information about administration and provide copy of trust instrument and (3) furnish an annual accounting of the trust
duty to separate trust property and keep records
trustee may not commingle trust property with own property or others trusts
discretionary trust
a beneficiary cannot interefere with the exercise of the trustee’s discretion UNLESS abuse of power- what abuse depends on extent of discretion conferred on trust (bad faith and dishonesty always abuse)
duty of loyalty for self dealing
trustee owes a duty of undivided loyalty to trust and beneficiaries.
absent court approval or a contrary trust provision, a trustee cannot enter into any transaction with the trust even if paying full value (good faith or benefit irrelevant)
Duty of loyalty and conflict
trustee msut not place himself in a position that could create a conflict of interest
breaches when enters into any transaction in which he is dealing with the trust in his individual capacity
Trustees as principal shareholder
a transaction in which the trustee invests trust assets in a corporation of which the trutee is a principal shareholder is considered self-dealing
UTC: transaction is presumed to be a violation
Trustee duty in investment factors
- general economic conditions
- role that each investment players within overall trust portfolio
- expected total return from income
- needs for liquidity, regularity of income and preservation or appreciation of capital
expenses against income
50% of regular compensation of trustee
ordinary expenses
insurance premiums covering loss of a principal asset
expenses against principal
50% of compensation of truste, accounting, jduicial proceedings
expenses of proceeding concerning principal
payments on the principal of a trust debt
estate taxes
disbursement related to environmental matters
receipts for income
use or investments
cash dividends
proceeds from contracting insuring trustee against loss
10% of payment from deferred compensation
10% proceeds received from liquidating asset
10% from a working interest (oil/gas)
receipts for principal
extraordinary receipts
stcok dividends
proceeds from life insurance policy naming trust or trustee as benef.
90%
