Trustee powers and duties Flashcards
Trustee implied powers:
Power to sell trust property; power to incur expenses; power to lease; power to borrow
Trustee duties owed to beneficiaries:
Duty of Loyalty Duty to Invest (and diversify) Duty to Earmark Duty to Segregate Duty not to Delegate Duty to Account Duty of Due Care
Duty of Loyalty
Requires that the trustee administer the trust for the
benefit of the beneficiaries (implicitly, trustee must be
impartial), having no other consideration in mind (NO SELF DEALING)
Duty of loyalty breach remedy:
Any losses trustee pays for, any personal profit goes to beneficiary
Duty to Invest:
THREE jx split:
1) State LIST of good investments that must be followed absent any instruction
2) Common Law prudent person test: The duty to invest requires the trustee to act as reasonably prudent person investing his own property, trying to maximize income while preserving corpus. If the trustee holds himself out as having greater skill, he is held to that higher standard
3) Uniform Prudent Investor: most states: act as PRUDENT INVESTOR: look at investments AS A WHOLE not individual investments
Duty to invest: State list and common law prudent person
Fed gov. bonds; fed insured certificates of deposit, first deeds in real estate
Duty to Earmark:
Breach remedy:
Requires trustee to LABEL TRUST PROPERTY as trust property.
Any loss for failure to earmark paid for by trustee, even if loss isn’t their fault (stock market crash). MODERN APPROACH: trustee pays for loss only if the loss is b/c of failure to earmark
Duty to segregate:
The trustee cannot co-mingle his own personal funds with trust funds
Duty not to delegate:
Trustee can rely on advisors but can’t direct them to do shit BUT can delegate to advanced investors
Duty to account
must give income and expenses of trust regularly
Duty of Due Care
The trustee must act as a reasonably prudent person dealing with his own affairs
What is another duty that is related duty to invest:
Duty to diversify
