Trustee's Powers and Responsibilities Flashcards
Where do trustee’s powers come from?
-trust instrument either expressly or by implication
-by statute
implied in law as necessary or appropriate to accomplish trust’s purposes
What are trustee’s default powers?
Unless expressly precluded by the trust instrument, the trustee has the power to:
-settle or abandon trust claims
-borrow money
-sell or least rust assets
-incur reasonable expenses necessary to maintain trust property
What does duty of loyalty prohibit trustee from doing?
-self-dealing using trust assets in any manner, even if done in good faith and with good outcome
-obtaining personal benefit other than the agreed-upon or statutory fees as a consequence of the trustee’s position
-interacting with beneficiaries and having business transactions with them
-obtaining any personal benefit from a third party with respect to dealings involving the trust estate
-permitting self to be in even an apparent conflict of interest regarding the trust and third parties
What is an exception to trustee’s prohibition from transacting with beneficiaries
-if all facts are disclosed to the beneficiary and the transaction is fair
How should receipts be distributed between trust principle and income?
Under the Uniform Principal and Income Act:
- Rents and cash dividends received are allocated to trust income, and then are
distributed to the trust’s income beneficiary
-Sales proceeds and stock dividends are allocated to principal of trust and
protected for ultimate distribution
What is the Prudent Business Person Rule
In investing, trustees must use the degree of skill, care and prudence that would be reasonably used by a business person in their own personal affairs
When is a higher standard applied to trustee’s execution of their fiduciary duties?
If a trustee possesses a superior business expertise or is a professional fiduciary a higher standard is applied such that the trustee will be held to the care, skill and prudence of an individual or entity possessing those capabilities
