Trust Administration Flashcards
(21 cards)
What are the three sources of a trustee’s power?
- The New York Fiduciary Powers Act
- Court order
- The trust instrument
What is an executor?
The person nominated in the testator’s will to act as personal representative and execute the will provisions
What is an administrator?
The person appointed by the probate court as personal representative to administer the estate of a person who dies without a will, or where no executor is named, or where the named executor is unavailable
What can a trustee NOT do?
- Self-dealing
- Borrow trust funds
- Continue a business w/o court approval (liable for losses if no approval)
What are a beneficiary’s rights to investigate the actions of the trustee?
The beneficiary can demand an accounting from the trustee / executor / administrator
Can a trustee buy or sell assets from the trust to himself?
No, this is self dealing
Can a trustee borrow trust funds?
No, this is self dealing
Can a trustee lend money to the trust?
No, this is self dealing. Any interest earned must be returned to the trust and any security given is invalid.
Can a trustee make money from serving as trustee?
Only by reasonable trustee fees. A trustee cannot take advantage of confidential information received while acting as trustee.
Can a corporate trustee buy its own stock as a trust investment?
No, this is self-dealing
What are the two affirmative duties regarding self-dealing?
- Duty to keep trust / personal assets apart
2. Duty to earmark trust assets by titling them “in trustee’s name, as trustee”
What is the remedy for commingling personal and trust funds?
- If commingled funds are used to purchase an asset and the value goes down, there is a conclusive presumption that personal funds were used. You take the hit on any losses.
- If commingled funds are used to purchase an asset and the value goes up, there is a conclusive presumption that trust assets were used and any profit goes to the trust.
Can a trustee be removed for breach of a fiduciary duty?
Yes, if sued by the beneficiary
Can a beneficiary ratify or waive a breach of a fiduciary duty?
Yes.
Example - prohibited transaction is beneficial to trust
What it a surcharge action?
An action by a beneficiary against a trustee for any loss resulting from a breach of a fiduciary duty
What is the No Further Inquiry rule?
A breach of a fiduciary duty by self-dealing is an automatic wrong and no further inquiry need be made.
What does it mean when there is no further inquiry?
Breaching trustee cannot use defenses such as good faith or reasonableness. It’s like a form of strict liability.
Can a beneficiary recover from a third party who is a BFP for value?
No.
Can a trustee make loans or sales with a relative?
No, this is indirect self-dealing and likewise prohibited
Can a trustee make a loan or sale to a business of which the trustee is an officer, employee, partner, or principle shareholder?
No, this is indirect self-dealing and likewise prohibited
Can an exculpatory clause relieve a trustee of liability for breach of a fiduciary duty?
Yes, in a lifetime / inter vivos trust.
No, in a testamentary trust (void against public policy)
