Trustee's Fiduciary Duties Flashcards
What is duty of loyalty
Requirement that trustee act in the beneficiaries’ interest and not engage in transactions involving a conflict of interest or self-dealing
May trustee invest trust assets in corporation where trustee has an interest
No, this is a violation of duty of loyalty unless found fair and reasonable by an independent source
What is duty to invest sensibly
Uniform Prudent Investor Act states taht a trustee owes a duty to invest trust asets sensibly
Factors considered by courts to determine whether duty to invest sensibly was breached
-trust requirements
-general economic conditions
-the part investment plays in overall portfolio
-trust’s liquidity, income and capital
What is duty to diversify
Duty to diversify involves investments for both income and disbursement purposes
What is exception to duty to diversify
Exception to duty if trust purposes are better served without diversifying
What is dity of care
Duty of care (or duty to act in good faith under Uniform Trust Code) requires that trustee adhere to trust purpose when making decisions regarding trust assets
What duty of loyalty does trustee owe beneficiaries of trust?
Trustee owes duty of utmost loyalty and good faith to the beneficiaries in carrying out obligations under a trust
What are limitations on trustee’s self-dealing
Trustee is prohibited from self-dealing in any manner, even if done in good faith, with trust assets and is ordinarily precluded from obtaining any personal benefit other than the agreed-upon statutory fees as a consequence of position
What is trustee’s duty of care
A trustee must exercise care in the administration of the trust
What is the standard of care for trustee?
A trustee must exercise degree of care, skill and prudence with respect to trust assets as would a reasoanbly prudent businessperson with respect to their own affairs
What is entailed within trustee’s duty of care
Trustee’s duty of care includes obligation to take reasonable steps to protect and preserve the trust estate, including obtaining necessary insurance
Must trustee administer trust in accordance with the law?
Yes, trustee has a duty to adminsiter the trust according to applicable law
How are receipts to be distributed between trust principal and income
UPIA specifies the distribution of receipts between trust principal and income as:
1. all ordinary expenses, including ordinary repairs, are allocated to trust income
2. extraordinary repairs, which are those necessitated by an unusual or unforeseen occurrence, and which are beyond the usual or regular kind, are allocated to principal
