Trust administration

Question 1

trustee’s power

Answer 1

(1) powers expressly conferred upon her by the terms of the trust
(2) powers that an unmarried individual has over their own property
(3) powers that are appropriate to achieve the proper investment, management, and distribution
(4) powers conferred upon her by the UTC-

Question 2

duties of the trustee

Answer 2

1. duty to administer
2. duty of loyalty
3. duty to report
4. duty to separate trust property and keep records
5. duty to enforce claims and defend trust from attach
6. duty to preserve trust property and make it productive

Question 3

duty to administer

Answer 3

good faith and purdent manner

if special skill or expertise she will be held to higher standard

more than one beneficiary- act impartially

Question 4

duty of loyalty

Answer 4

(1) cannot buy or sell trust assets
(2) may not sell the property of one trust to another trust of which also trustee
(3) may not borrow trust funds or loan her personal funds
(4) cannot use trust assets to secure a personal loan
(5) cannot personally gain
(6) corporate trust cannot invest in its own stuct- but can retain it
(7) self-employment

Question 5

commingling of trust property

Answer 5

if commingles trust property with own property- losses are charged to trustee and gains are credited to trust

must separate and earmark

Question 6

trustee must report

Answer 6

respond to beneficiaries request and provide an annual accounting

Question 7

preserve and make trust property productive

Answer 7

must use reasonable care to invest the property- prudent investor rule, collect claims dut, lease or manage, record documents, pay taxes, etc.

Question 8

remedies for breach of trust

Answer 8

(1) enforce specific performance
(2) enjoin trustee from committing a breach
(3) compel trustee to pay money or restore property
(4) suspend or remove trustee

Question 9

trustee not liable for breach if

Answer 9

(1) acted in reaeaonble reliance on terms of trust OR

(2) beneficiary consented, released, or ratified AS LONG AS not improperly induced

Question 10

exculpatory clauses for trustee

Answer 10

void if they (1) releive trutee of liability for breach of trust committed in bad faith or with reckless indifference OR (2) appear in trust instrument because trustee’s abuse of confidential relationship with settlor

Question 11

pour over gift from will to revocable trust

Answer 11

allowed if will is established during lifetime

may remain unfunded during lifetime - but must be clearly identified from language in the will

Question 12

totten trust

Answer 12

bank account depositor declares himself trustee of the account for a person who is to receive the money in the account at the time of the depositors death

Question 13

how is a toten trust revoked

Answer 13

(1) the withdrawal of funds,
(2) any lifetime act manifesting the intent to revoke, and
(3) specific contradictory provision in a will

Question 14

what is a constructive trust

Answer 14

flexible equitable remedy to prevent unjust enrichment resulting from wrongful conduct

Question 15

constructive trustee’s duty

Answer 15

to convey the property to the person who would have owned it but for the wrongful conduct - the beneficiary

account for profits taken and/or fair rental value of his use of it

Question 16

breach of promise

Answer 16

generally will not raise a constructive trust UNLESS

1. fraudulent promise
2. breach of promise by one in a confidential relationship
3. breach of promise by the decedent’s devisee or heir to hold property for benefit of a third person
4. breach of promise by the decedent
5. breach of promise to the debtor by the buyer at the foreclosure sale

Question 17

beneficiary identification

Answer 17

need not be identified at time a trust is created but must be susceptible of identification by the time their interests are to come into enjoyment

Question 18

beneficiary class

Answer 18

allowed but the class must be sufficiently definite

settlor may allow trustee dsicretion to select class members as long as class if reasonably definite.

Question 19

over broad class

Answer 19

trust (or a portion) wil lbe invlaid

Question 20

effect of lack of beneficiary

Answer 20

trust (or a portion) is a resulting trust in favor of the settlor or the settlor’s successors in interest is presumed

Question 21

cy pres doctrine

Answer 21

applies when a specific charitable purpose indicated by the settlor is no longer possible or practical, AND settlor manifested a general charitable intent

Question 22

UTC- general charitable intent

Answer 22

presumed and application of cypres is MANDATORY

Question 23

cy pres effect

Answer 23

court can direct that the trust property be applied to another charitable purpose as close as possible to the original one rather than letting trust fail and become a resulting trust

Question 24

when does a class close

Answer 24

when some member of the class can call for a distribution of her share of the class gift

Question 25

Possession and enjoyment of trust postponed

Answer 25

i.e.- gift follows life estate- the class remains open until the time fixed for distribution- death of life tenant

Question 26

Requirements of survival of class members

Answer 26

generally not required UNLESS express trust terms state otherwise

Question 27

Trust antilapse statute

Answer 27

Generally they do not apply UPC and some states have allowed anti-lapse statutes which allows a class trust described as children- to pass to the predeceased childs children

Question 28

duty to preserve and make productive

Answer 28

reasonable care with respect to trust property meaning investing trust funds within a reasonable time and selling and reinvesting as needed lease land, collect claims, invest money

Question 29

Uniform Prudent investor Act (UPIA)

Answer 29

trustee must invest and manage trust assets as a prudent investor would, taking into account the purposes, terms, distribution requirements, and there circumstances of the trust

Question 30

Duty to diversify

Answer 30

trustee has a duty to diversify investments unless there are special circumstances indicating the trust purposes would be better served without diversification

Question 31

duty to report

Answer 31

MUST (1) provide qualified beneficiaries with her name, address, and telephone number; (2) respond to requests for information about administration and provide copy of trust instrument and (3) furnish an annual accounting of the trust

Question 32

duty to separate trust property and keep records

Answer 32

trustee may not commingle trust property with own property or others trusts

Question 33

discretionary trust

Answer 33

a beneficiary cannot interefere with the exercise of the trustee's discretion UNLESS abuse of power- what abuse depends on extent of discretion conferred on trust (bad faith and dishonesty always abuse)

Question 34

duty of loyalty for self dealing

Answer 34

trustee owes a duty of undivided loyalty to trust and beneficiaries. absent court approval or a contrary trust provision, a trustee cannot enter into any transaction with the trust even if paying full value (good faith or benefit irrelevant)

Question 35

Duty of loyalty and conflict

Answer 35

trustee msut not place himself in a position that could create a conflict of interest breaches when enters into any transaction in which he is dealing with the trust in his individual capacity

Question 36

Trustees as principal shareholder

Answer 36

a transaction in which the trustee invests trust assets in a corporation of which the trutee is a principal shareholder is considered self-dealing UTC: transaction is presumed to be a violation

Question 37

Trustee duty in investment factors

Answer 37

1. general economic conditions 2. role that each investment players within overall trust portfolio 3. expected total return from income 4. needs for liquidity, regularity of income and preservation or appreciation of capital

Question 38

expenses against income

Answer 38

50% of regular compensation of trustee ordinary expenses insurance premiums covering loss of a principal asset

Question 39

expenses against principal

Answer 39

50% of compensation of truste, accounting, jduicial proceedings expenses of proceeding concerning principal payments on the principal of a trust debt estate taxes disbursement related to environmental matters

Question 40

receipts for income

Answer 40

use or investments cash dividends proceeds from contracting insuring trustee against loss 10% of payment from deferred compensation 10% proceeds received from liquidating asset 10% from a working interest (oil/gas)

Question 41

receipts for principal

Answer 41

extraordinary receipts stcok dividends proceeds from life insurance policy naming trust or trustee as benef. 90%