Trustee Powers and Duties Flashcards
Express Powers
A trustee has powers expressly conferred by the trust instrument, state law and court decree
Implied Powers
A trustee has broad powers as necessary to carry out trust terms and promote beneficiary interests.
Resignation
Once trustee position is accepted, can resign only where permitted by trust, court or all beneficiaries.
Compensation
Entitled to reasonable compensation for duties.
Duty of good faith
A trustee must administer the trust in good faith in accordance with the trust purpose and terms, in the interests of the trust beneficiaries. If a trustee acts in bad faith or dishonesty, court may interfere with actions.
Duty of loyalty to the beneficiaries
In all matters relating to the trust, the trustee must put the interest of the beneficiaries first.
(i) must avoid self dealing
A trustee may not use the trust property for his own profit or for any purpose unconnected with the trust. For example: trustee may not buy or sell assets or personally profit by purchasing stock in his own corporation.
(ii) conflicts of interest
If a trust has two or more beneficiaries, the trustee should give due regard to the beneficiaries respective interests when it invests, manages and distributes trust property.
Remedies for a breach of loyalty?
Beneficiary may
(i) set aside the transaction
(ii) recover any profit by the trustee
(iii) waive breach if positive outcome or
(iv) recover property (unless buyer was BFP)
Duty of care
To exercise care, skill, and caution that would be exercised by a reasonably prudent person, in managing the trust.
Mistakes in judgment do not expose the trustee to liability as long as reasonable care was exercised.
What is the prudent investor rule?
Trustee must act prudently and reasonably in managing the interests of the trust, as a prudent investor, as if it was his own. Includes a duty to diversify trust assets and protect from devaluation.
A trustee must invest trust assets prudently. Factors:
(i) distribution requirements of the trust
(ii) general economic conditions
(iii) the role the investment plays in relation to the trust’s overall portfolio
(iv) the trust’s need for liquidity, regularity of income and preservation or appreciation of capital.
Remedies for a breach of a duty of care?
Trustee is liable for any resulting loss
Duty to perform personally?
Except acts that would be unreasonable to do personally.
Modern: UPIA, T may delegate investment and management. Must use reasonable care, skill and caution to select agent, establish scope and periodically monitor agent actions.
Duty to earmark assets
Identify, separate and account for assets.
T must not commingle trust assets with own assets.
May be personally liable to 3P on K & for torts in course of trust administration.
