Trustee's duties

Question 1

To whom does a trustee owe the duties in a revocable trust and an irrevocable trust?

Answer 1

Revocable

Settlor

Irrevocable

Beneficiaries

Question 2

_{Duty of Care (Investments)}

Where instructed to invest, what standard must he exercise?

Answer 2

That of a prudent investor

Question 3

_{Duty of Care (Investments)}

What five elements must be considered by a trustee in making investment decisions?

Answer 3

1. General economic conditions
2. Inflation or deflation
3. Tax consequences
4. Role of each investment
5. Total expected return

Question 4

_{Duty of Care (Investments)}

How is the prudent investor standard affected by a trustee with higher skills in investing, and lower skills in investing?

Answer 4

Higher Skills

Higher standard

Lower Skills

Still apply prudent investor standard

Question 5

_{Duty of Care (Investments)}

How should the investment portfolio be viewed to determine if the trustee has met the standard?

Answer 5

View entire investment portfolio; do not focus on single, bad trades

Question 6

_{Duty of Care (Investments)}

Can the trustee just put all the trust funds into one investment?

Answer 6

Generally, the portfolio must be diverse, unless

1. T, under special circumstances decides the purposes of the trust are better served without diversifying, or
2. It is a revocable trust and the settlor directs the trustee to make a non diverse investment

Question 7

_{Duty to Administer}

How must a trustee administer a trust?

Answer 7

In good faith and in a prudent manner

Question 8

_{Duty to Administer}

Where there is more than one beneficiary, how must a trustee treat them?

Answer 8

Impartially, while taking into account their differences

Question 9

_{Duty to Administer}

Can a trustee delegate discretionary functions?

Answer 9

Yes, if a prudent T would also do so

Question 10

_{Duty to Administer}

What must a trustee do when they wish to delegate?

Answer 10

Exercise reasonable care in selecting the agent and must periodically review them

Question 11

_{Duty of Loyalty}

Absent court approval or express provision in the will, what must a trustee never do?

Answer 11

Enter into a transaction where she is dealing with the trust in her individual capacity

Question 12

_{Duty of Loyalty}

How do we describe the duty of loyalty owed by T to Bs?

Answer 12

Duty of undivided loyalty

Question 13

_{Duty of Loyalty}

What five things will breach the duty of loyalty?

Answer 13

1. Buy/sell trust assets
2. Transfer property between the trust and another trust where she is a T
3. Borrow trust funds / loan personal funds to the trust
4. Use trust assets to secure a personal loan
5. Personally gain from the trust, under she renders “extraordinary services”

Question 14

_{Duty of Loyalty}

What are a beneficiary’s options where trustee self deals?

Answer 14

1. Affirm deal if trust profited
2. Set aside deal if trust lost
3. Trace profits if trustee profited