Trustee Powers

Question 1

Trustee Duties

Answer 1

1. Duty to Administer in good faith & in prudent manner in accordance with trust terms
2. Duty of loyalty
3. Duty to report to beneficiary
4. Duty to separate trust property
5. Enforce and defend against claims
6. Preserve and make property productive

Question 2

Trustee’s Duty of Loyalty

What happens if breached?

Answer 2

No self dealing. A breach gives the beneficiary power to void the transaction unless: it was authorized by the trust; the beneficiary failed to bring suit within the proper time period; beneficiary consented to transaction

Question 3

Court’s remedies for breach of trust by trustee

Answer 3

Court can:

1. Order specific performance;
2. Issue injunction;
3. Compel trustee to pay/restore trust property; and
4. Suspend or remove trustee

Question 4

Trustee is liable to beneficiaries for the greater of:

Answer 4

1. Amount to restore and lost distributions; or

2. Trustee’s profit

Question 5

Trustee defenses to liability

Answer 5

Acted in reasonable reliance on trust terms

Beneficiary consented, released, or ratified

Question 6

Exculpatory clauses are void if:

Answer 6

They relieve the trustee of liability for bad faith breach or reckless indifference; or appear in trust because of abuse of relationship between settlor and trustee

Question 7

Trustees are not liable for the actions of a co-trustee if:

Answer 7

They did not join in the action, exercised reasonable care, and compelled co-trustee to redress