Trust Administration and Trustee's Duties

Question 1

Powers of Trustee

Answer 1

Look to trust documents

If trust is silent, trustee has all powers NECESSARY to act as a REASONABLE PRUDENT person in managing the trust

Question 2

Trustee’s Fiduciary Duties

Answer 2

(1) Duty of Loyalty and Good Faith

(2) Duty of Care

Question 3

Duty of Loyalty and Good Faith

Answer 3

Duty to administer trust in good faith

Act reasonably when investing property

Manage trust solely in best interest of beneficiaries

Question 4

Duty of Loyalty and Good Faith: No Self-Dealing

Answer 4

When trustee personally engages in transaction involving trust property, a conflict of interest arises between trustee’s duties to beneficiaries and trustee’s own personal interest

Question 5

Duty of Loyalty and Good Faith: Conflicts of Interest

Answer 5

Assessed under “reasonable and in good faith” standard if alleged conflict of interest cannot be characterized as self-dealing

Question 6

Duty of Loyalty and Good Faith: Authorized Self-Dealing

Answer 6

If authorized, transaction must still be REASONABLE AND FAIR to avoid liability for breach

Question 7

Duty of Care

Answer 7

Standard of care imposed upon the trustee is that which a person of ORDINARY PRUDENCE would practice in the care of their own estate

Question 8

Duty of Care: Delegation to Third Party

Answer 8

Delegation PERMITTED if it would be unreasonable for settlor to expect trustee to
undertake such functions

Trustee must OVERSEE third party and decision-making process

Question 9

Duty of Care: Prudent Investor

Answer 9

Trustee has the discretion to invest and manage the trust property as would a prudent investor

Trustee expected to DIVERSIFY assets

Question 10

Standing to Enforce Trustee’s Fiduciary Duties

Answer 10

ANY beneficiary has standing against trustee to enforce trustee’s fiduciary duties

Question 11

Duty to be Impartial

Answer 11

Trustee cannot be influenced by favoritism or animosity

Question 12

Duty to Inform

Answer 12

Trustee has duty to INFORM beneficiaries about nature of trust property

Question 13

Duty to Account

Answer 13

Trustee has duty to account for actions taken on behalf of the trust

Question 14

Beneficiaries’ Remedies

Answer 14

(1) Compel trustee to act
(2) Enjoin trustee from doing something
(3) Remove trustee

Question 15

Trustee’s Liability to Third Parties

Answer 15

Trustee PERSONALLY LIABLE for contracts/tortious acts

Can seek indemnity from trust if acting within scope of trustee’s duties

Question 16

Release from Liability

Answer 16

Beneficiary may release a trustee from liability for breach of trust

May be done by:
(1) Consent to act/omission

(2) Agreement
(3) Affirm transaction
(4) Participate in breach