Trust Administration

Question 1

Sources of trustee’s power

Answer 1

Expressly conferred
Granted by state law
Implied power

Question 2

Joint powers

Answer 2

Co-trustees can act by majority decision

Question 3

Imperative powers

Answer 3

Powers the trust instrument require

Question 4

Discretionary powers

Answer 4

Ones that the trustee may or may not perform as the trustee determines in their judgment

Question 4

Duty to administer trust

Answer 4

Duty to administer the trust in good faith and in a prudent manner. Trustee must act impartially

Question 5

Duty of Loyalty

Answer 5

Trustee owes a duty of undivided loyalty to beneficiaries

Question 6

Duty to report

Answer 6

Must provide the qualified beneficiaries with the trustee’s name, address, and phone number; respond to B requests for inform about the trust’s administration; furnish an annual accounting of the trust

Question 7

Duty not to commingle property

Answer 7

Trustee can’t commingle personal property with trust property

Question 8

Duty to enforce claims and defend trust from attack

Answer 8

Self-explanatory

Question 9

Duty to preserve trust property and make it productive

Answer 9

Expected to take actions to make the property make money

Question 10

UPIA

Answer 10

Uniform Prudent Investor Act

Question 11

UPIA Standard of care

Answer 11

reasonable care, skill, and caution when investing trust assets

Question 12

(UPIA) Trustee with special skills

Answer 12

Held to a higher standard

Question 13

(UPIA) Trustee with lower skills

Answer 13

Can’t excuse a breach because of lower skill

Question 14

Delegation

Answer 14

Trustee may delegate investment functions but only if a prudent trustee of comparable skills could properly delegate uder the circumstances. Trustee not liable for agent’s action if delegation is proper

Question 15

Remedies for breach of trust

Answer 15

Specific performance
Enjoin the trustee from committing a breach
Compel the trustee to pay money
Suspend or remove the trustee

Question 16

Damages to beneficiaries for breach

Answer 16

Greater of:
Amount necessary to restore property
Trustee’s profit

Question 17

Remedies for self-dealing

Answer 17

Affirm the transaction if trust profited
Set aside the transaction if trust lost money
Trace profits from the trustee if trustee profited

Question 18

Allocation of income

Answer 18

Receipts:
Ordinary receipts from use of trust property
Cash dividends
Proceeds from Contract insuring trustee against loss
10% of proceeds received from a liquidating asset
10% of proceeds received from a working interest

Expenses:
50% of regular compensation of the trustee and of all expenses for accountings
Ordinary expenses
Insurance premiums

Question 19

Allocation of Principal

Answer 19

Receipts:
Extraordinary receipts
Stock Dividends
Proceeds from life insurance policy naming trust or trustee as beneficiary
90% of payment from deferred compensation plan; proceeds received from a liquidating asset; working interest

Expenses:
50% of regular compensation for trustee and all expenses for accountings, etc.
Expenses of a proceeding that concerns a principal interest
Payments on the principal of a trust debt
Estate taxes
Disbursements related to environmental matters