Trust Administration and role of trustee Flashcards
Trustees powers
- expressly conferred upon them by the terms of the trust
- powers granted by state law and
- implied powers that are appropriate to achieve the proper investment, management, and distribution of the trust property
UTC sources of trustee’s power
- powers conferred by terms of the trust
- powers that an unmarried competent owner has over individually owned property
- any other powers appropriate to achieve the proper investment, management, and distribution of trust property and
- any other powers conferred by the UTC
trustee’s imperative powers
trust instrument requires its exercise and court can order if trustee won’t do it
trustees
discretionary powers
ones the trustee may or may not perform
- subject to judicial review
- event if granted total control it is still reviewable
duties of the trustee
- duty to administer in good faith and in prudent manner
- duty of loyalty
- duty to report
- duty to separate trust property and keep records
- duty to enforce claims and defend trust
- duty to preserve trust property and make it productive
duty of loyalty
**undivided loyalty to the trust and its beneficiaries
- can’t buy or sell assets
- may not sell property of one trust to another
- may not borrow trust funds nor loan persona funds (unless to protect the trust)
- can’t use trust assets to secure a personal loan
- can’t personally gain through position
- self employment
beneficiary rights in cases of breach of duty of loyalty
transaction is voidable unless
1. court or the terms approved it
2. beneficiary failed to bring suit within time period
3. beneficiary gave content, ratification, or release or
4. it involves a K or claim arising before they became the trustee
duty to report
- provide qualified beneficiaries with trustee’s name, address, and phone number
- respond to request for info about the trust’s administration adn copy of instrument if requested
- furnish an annual accounting of the trust
Uniform Prudent Investor Act (UPIA) standard of care
reasonable care, skill and caution when investing and managing trusts
UPIA portfolio approach
must be evaluated in context of the entire trust portfolio and as part of an overall strategy
factors trustee should consider when making an investment
- economic conditions
- effect on inflation or deflation
- tax consequences
- role each investment plays in the overall trust
- expected TROI
- other resources
- liquidity needs
- asset’s relationship or value to purpose of trust
how is UPIA compliance reviewed
at the time of the decision or action
changes in UPIA duty
someone with special skills will be held to a higher standard
delegating management of a trust
trustee can delegate and must act prudently in
1. selecting an agent
2. establishing scope and terms
3. periodically reviewing
What happens if a trustee breaches his duties
court may
1. enforce specific performance of duties
2. enjoin the trustee from committing a breach
3. compel trustee to pay money or restore the property
4. suspend or remove the trustee
damages for breach of duties
greater of
1. amount necessary to restore
2. trustee’s profit from breach
remedies for self-dealing
beneficiary have a choice of
1. affirm transaction if the trust profited
2. force them to give the money back
3. trace profits from trustee
When is a trustee NOT liable for breach
- trustee acted in reasonable reliance on the terms
- beneficiary consented to the conduct, released the trustee from liability, or ratifies the transaction so long as beneficiary not improperly induced
exculpatory clauses:
they are void if they 1. relieve the trustee of liability for breach of trust committed in bad faith or reckless indifference 2. appear in trust because of trustee’s abuse of a confidential relationship with settlor
Removal of a trustee
court can remove on own motion or request by settlor or beneficiary or a c-trustee
1. incapacity
2. unfitness
3. commission of breach
4. conflict of interest
trustees liability to third parties
General rule: trustee may be sued on the K in the trustees capacity and can be sued personally if they didn’t reveal their involvement
Indemnification: if entered into for the trust and was not in breach then can get indemnification or reimbursement
tort: personally at fault
Liability of third parties
- set aside transaction that are breaches if property is not in the bands of a bona fide purchaser
- BFP cuts off beneficiaries equitable interests
- beneficiary can’t sue third party
exceptions: 1. trustee participated in the breach 2. has left the jurisdiction and no successor is appointed 3. failes to sue a third person liable in tort or K
adjustment power define and factors
definition: gives trustee or representative the power to reallocate investment portfolio return
factors:
1. nature, purpose, and duration of trust
2. intent of the settlor
3. identity and circumstances of the beneficiaries
4. needs for liquidity
5. nature of trust assets
6. net amount allocated to income
7. whether and to what extent trust gives or denies trustee power
8. actual and anticipated economic effect
9. anticipated tax
