Trust administration problems

Question 1

Investments: Uniform Prudent Investor Act (UPIA): prudence is measured by conduct…

Answer 1

WHEN investment decision made NOT outcome or performance

Question 2

Investments: Uniform Prudent Investor Act (UPIA): Trustee must satisfy the “prudent investor” standard by…. (3 things)

Answer 2

1) exercising reasonable care, skill and discipline
2) taking into account the risk-return objectives of the particular trust and
3) taking into account the role each investment plays within the overall investment portfolio

Question 3

Investments: Uniform Prudent Investor Act (UPIA): trustee must establish a custom-tailored investment strategy for each trust, taking into account these factors (2 most important)

Answer 3

1) the role that each investment plays within the overall trust portfolio
2) the expected TOTAL return from income AND capital gain

Question 4

Under UPIA, investment returns are measured by

Answer 4

total return, including income and capital gain

Question 5

Under Uniform Principal & Income Act, trustee can exercise…

Answer 5

Adjustment power, and can allocate principal (e.g. capital gains) to income

Question 6

Principal or income? distributions from entity (corporation, partnership): money

Answer 6

allocated to income

Question 7

Principal or income? distributions from entity (corporation, partnership): all receipts other than money (e.g. stock dividends)

Answer 7

allocated to principal

Question 8

Principal or income? receipts from mineral leases, patents, copyrights, book royalties, other assets that produce income for a LIMITED TIME

and

receipts from deferred compensation (pension and profit-sharing plans, 401k plans, individual retirement accounts)

what’s the rule?

Answer 8

10 percent rule

10% allocated to income

90% allocated to principal

Question 9

Trustee powers: The Uniform Trust code, which applies to all trusts except to the extent the trustee’s powers are expanded or limited by the settlor, gives broad fiduciary powers…

2 exceptions

Answer 9

1) imprudent investments

2) self-dealing

Question 10

Trustee duties: duty to notify beneficiaries of trust

Answer 10

within 60 days of accepting trusteeship, must notify bens of

1) trust’s existence
2) identity of settlor(s)
3) their right to request a copy of the trust instrument
4) their right to an annual report
5) trustee’s name, address, phone number