Fiduciary Duties Flashcards
May a trustee elect to have the optional unitrust provision of the New York UPAIA applied to the trust if the trustee is a remainder beneficiary of the trust?
Yes. The purpose of the UPAIA is to make it easier for trustees to balance the interests of the income and remainder beneficiaries as required under the Prudent Investor Act. The UPAIA tackles the conflict between investing in income producing assets that do not support growth of the trust corpus to the detriment of the remainder beneficiaries and investments that focus on growing the trust corpus to the detriment of the income beneficiaries. Instead, the UPAIA focuses on a total investment strategy that maintains adequate income distribution levels while also protecting and growing the trust corpus.
Is a purchase of property from the executor of an estate by his wife, without leave of the court, illegal and void?
Yes. It is well settled that an executor, like a trustee, cannot purchase from himself without leave of the court and the same limitation is imposed on a purchase by his wife. Thus, a purchase of property from the executors of an estate by one of the executors’ wives is illegal and void.
May a trustee who is acting in good faith engage in self-dealing if the trust suffers no injury as a result?
No. The general rule of equity that a trustee must only deal with the trust property as trustee, and not in an individual capacity, applies regardless of the trustee’s good faith and whether the self-interested transaction causes injury to the trust.
Can trust terms waive the beneficiaries’ right to an accounting?
No. Trust terms cannot waive the beneficiaries’ right to an accounting. Unlike the Uniform Trust Code, the North Carolina Uniform Trust Code (NCTC) provides that a trust’s terms prevail over its provisions, with two exceptions:
(1) a trustee must act in good faith and in accordance with trust terms, purposes, and the beneficiaries’ interests; and
(2) the court retains authority to take any action needed to protect the interests of justice.
If a will’s executor sells estate property for inadequate value due to a conflict of interest, is the sale void and the executor liable for the property’s appreciated value at the time of trial?
Yes. If a will’s executor sells estate property for inadequate value due to a conflict of interest, the sale is void, and the executor is liable for the property’s appreciated value at the time of trial.
Under the no-further-inquiry rule, a court may order rescission of a self-dealing transaction without considering the transaction’s fairness. With respect to damages, if a trustee is authorized to sell property, and the trustee’s only breach of trust is selling the property for too little, the trustee is liable for the property’s value at the time of the sale less the value the trustee received for underselling it.
Date-of-sale damages are appropriate if trustees have an authorization to sell property, rather than a duty to retain it.
Does a trustee’s failure to keep trust beneficiaries informed of facts that would help them protect their interests constitute a breach of fiduciary duty?
Yes. A trustee’s fiduciary duty includes the obligation to keep beneficiaries informed of all facts that would help them protect their interests. This means that the trustee must, prior to a non-routine transaction, inform the beneficiaries of any material facts affecting the beneficiaries’ interests. This is particularly the case where, the sole trust property is disposed of.
standards of conduct for trustees of discretionary trust
- prudence
- reasonableness
