Trustees Duty of Prudence Flashcards
The Uniform Prudent Investor Act is a
Default rule that can be altered by trust terms
Standard of Prudent Investor
The trustee shall
1) Consider the purposes, and requirements of the trust and
2) Exercise reasonable care, skill, and caution
No hindsight
Courts reviewing the trustee investment decisions must focus on the facts and circumstances at the time of the decisions, not hindsight
Overall Strategy
The trustee must establishes an investment strategy for the trust and investments are evaluated as part of the overall strategy rather than in isolation
Costs
Trustee must consider investment costs when making investment decisions
Diversification
The trustee must diversify trust investments unless she reasonably determines, because of special circumstnaces, the trust purposes are better served without diversification
Delegation
The trustee may delegate investment responsibilities to an agent, but must be reasonable in selecting and monitoring the agent
A trustee meeting this standard is not liable for investment losses incurred by the agent
The agent will if the agent did not invest with reasonable care
Safe Harbor for Trustee of small trustees
Trustees holding intangible personal property of 100k or less will be presumed to have been prudent in investing trust funds if invested in in state funds or insured bank deposits
Duties of Co-Trustee
If a disagreement occurs, majority decision controls
Each trustee must exercise reasonable care to prevent a trustee from committing a serious breach of trust and compel the co-trustee to redress a serious breach of trust
Following settlor’s directions
The trustee may follow the settlor’s directions concerning a revocable trust even if those directors would violate the trust terms
Trust Directors
Liable for any loss that results from breach of fiduciary and may assert any defenses that a trustee coudl assert
