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Flashcards in Trust Administation Deck (18)
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1
Q

Fiduciary Law dictates 2 main duties

A

Duty of loyalty – forbids self-dealing & adverse conflicts of interest
Duty of prudence – imposes objective reasonableness standard

2
Q

Co-Trustees actions under traditional law

A

Needed to act with unanimity

3
Q

Co-Trustees actions under modern law

A

majority can act if 3 or more tt’s

4
Q

Duty of inquiry under CL and UPC

A

Common law – required 3rd party to make inquiry

UTC §1012 – eliminates duty; replaces with duty to act in good faith

5
Q

no further inquiry rule

A

once self-dealing is shown, no further inquiry & transaction is voidable by beneficiary;
–> TT’s good faith & reasonableness are irrelevant

6
Q

Defenses for Self-dealing

A
  • -> Settlor authorized the self-dealing transaction

- -> Beneficiaries consented to transaction after full disclosure

7
Q

Exceptions for When bank is TT

A
  • ->Bank TT to deposit Trust fund w/ its own banking dept.

- ->Institutional TT may invest Trust assets in a common fund or mutual fund that it operates

8
Q

Beneficiary Remedy against Self-dealing TT

A

1) Hold TT accountable for any profit made on transaction
2) . If TT bought trust property, compel TT to restore it to Trust
3) . If TT sold his own property to Trust, compel TT to repay purchase price and take back property

9
Q

2 additional duties under fiduciary law

A

Duty of Impartiality

Duty to inform and account

10
Q

5 Administrative requirements under duty of prudence

A

1) . Duty to collect & protect Trust property [UTC §809]
2) . Duty to earmark Trust property [UTC §810(c)]
- —>TT must designate as Trust property rather than his own
3) . Duty not to commingle Trust funds w/ TT’s own funds
- ->TT guilty of breach of Trust if commingles [UTC §810(b)]
4) . Duty to keep adequate records of administration
- ->Higher standard of care for professional TTs [UTC §806]
5) . Duty to bring & defend claims [UTC §811]

11
Q

Investment function: prudent person role, traditional view

A

Traditional: define “prudence” negatively as absence of “speculation,” & then label particular products & techniques as speculative for all time & purposes

12
Q

Investment function: prudent person role, modern view

A

Modern: prudence measured principally by the process; increased sensitivity to risk tradeoff; diversification; delegation

13
Q

TT’s discretion under distribution function

A

TT Discretion: even if TT’s discretion is described as sole, absolute, or uncontrolled, it is not in fact absolute.
—>Beneficiary can always call TT to account
UTC §814 – TT must exercise discretion in good faith and in accordance with Trust’s terms

14
Q

Delegation standard for TT

A

UTC §807 – prudent TT of comparable skill

15
Q

Duty of impartiality

A

“If a Trust has 2 or more beneficiaries, the TT shall act impartially in investing, managing, and distributing to the Trust property, giving due regard to the beneficaries’ respective interests.” UTC §803
–>Not aptly named; not equality but balancing by giving due regard to beneficiaries’ respective interests

16
Q

Requirement of affirmative disclosure

A

most states, as in §813(c), impose on TT duty of periodic accounting to beneficiaries

17
Q

TT liability for breach

A

avoided if facts of breach are fairly disclosed in accounting filed with Court, notice to beneficiaries, and no timely objection.

18
Q

Duty to inform and account

A

Ongoing duty to keep beneficiaries informed about Trust administration, in particular information needed by beneficiaries to protect their Trust interests. UTC §813