Powers and Duties of Trustees Flashcards
Duty of loyalty
Duty to act for the interests of the beneficiaries, to act impartially
Duty to act impartiality
If a trust has two or more beneficiaries, the trustee should give due regard to the beneficiarie’s respective interests when it invests, manages and distributes trust property.
Can a trustee personally buy or sell trust assets?
No. This is a violation of their duties.
Can a trustee personally profit by buying stock of one’s own corporation?
No. It may not purchase its own stock and should not invest in a corporation in which he owns 70% of the stock.
Duty of care - prudent administration
The trustee shall invest and manage assets held in a fiduciary capacity as a prudent investor would, taking into account the purposes, terms, distribution requirements expressed in the governing instrument and other circumstances of the fiduciary estate. The trustee must exercise reasonable care, skill and caution.
Uniform Prudent Investor Act
This states that a trustee must invest trust assets prudently. This requires
the trustee to examine: (1) the distribution requirements of the trust; (2) general economic
conditions; (3) the role the investment plays in relationship to the trust’s overall investment
portfolio; and (4) the trust’s need for liquidity, regularity of income, and preservation or
appreciation of capital
Entire estate portfolio examined to determine prudence.
The trustee’s investments should not be evaluated in isolation but in the context of the portfolio s a whole and as part of an investment strategy.
Duty to diversify
The trustee is not liable for declines in value due to a downturn resulting from general economic conditions.
Duty to allocate properly to principal an dincome
Receipts earned during the administration of the trust are allocated to either the income
or the principal of a trust. Most states have adopted a version of the Uniform Principal and Income Act: Ordinary expenses should be allocated to income, extraordinary expenses should be allocated to the principal.
Assets allocated to the principal
Money received from principal asset, life insurance proceeds, eminent domain awards, all property other than money received from an entity and distribution of stock.
Assets allocated to Income
Rental income, interest, money
When is a trust principal not immediately distributable?
When a trust terminates, the trustee must continue to hold the trust assets. The trustee could distribute the income earned, add it to the principal, or distribute it to the persons presumed to be remaindermen.
What are the remedies for a breach of a trust?
Suspending/removing a trustee or decreasing compensation; compelling a trustee to perform trust duties; compelling the trustee to pay damages or asking the court to order relief.
What is the remedy for a breach of trust in a self-dealing case?
The trust beneficaires may rescind the transaction, and return the property to the trust, recover any profits the trustee made. If the assets purchased have declined in value the beneficiaries are more likely to seek damages than recission.
What is delegation under the second restatement approach?
A trustee cannot delegate power to select investments.
