Trustee Duties and Liabilities

Question 1

Sources of Trustee Power

Answer 1

1. Express in Trust Instrument
2. Statutory Powers
3. Court granted powers

Question 2

Impied Powers of Trustee

Answer 2

1. Power to Sell and Lease
2. Power to Incur Expenses
3. Power to Borrow Money
4. Power to Hire Agent
5. Power to Mortgage
6. Power to Repair

Question 3

Multiple Trustees

Answer 3

Majority can act absent contrary provision

Question 4

Duties of Trustees

Answer 4

1. Duty of **Loyalty **and Good Faith
2. Duty to Label and Seperate Trust Property
3. Duty to** Perform Personally**
4. Duty of Prudent Investment
5. Duty to keep Accurate Records from beginning of trust

Question 5

Standard of Care for Trustee

Answer 5

Skill and care of reasonable person

Question 6

Duty of Loyalty and Utmost Good Faith

Answer 6

No Self Dealing –> can never personally benefit

Question 7

Duty to Label and Seperate Trust Property

Answer 7

No Commingling

Question 8

Duty to Perform Personally

Answer 8

Trustee Duties cannot be delegated

Question 9

Duty of Prudent Investment

Answer 9

Trustee must consider the following when investing:
1. Purpose of the Trust
2. Terms of the Trust
3. Distribution Requirements

Standard: Based on looking at portfolio in totality at the time of investing

Question 10

Sub-Duties of Prudent Investing

Answer 10

1. **Diversification **of Assets
2. Duty to **Review Investments **(to ensure compliance)
3. Duty of Loyalty in Investing = serves solely the beneficiaries
4. Duty to Delegate Investing Decisions with Reasonable Care in: (i) selecting agent; (ii) establishing the scope of the delegation; (iii) periodically reviewing agent’s works

Question 11

Trustee Personal Liability to Beneficiaries for Money Damages Calculation methods:

Answer 11

1. Lost Profits
2. Depreciation or losses to trust proeprty
3. Profits earned during breach

Question 12

Grounds for Beneficiaries to Seek Removal

Answer 12

1. Dispute that interferes with proper administration of trust
2. Reusal to Post Bond
3. Refusal to Account
4. TEST: Court’s look to settlor’s intent

Question 13

Exculpatory Clauses

Answer 13

Void to the extent it exculpates bad faith, intentional breaches, or recklessness

Question 14

Trustee Liability to Third Parties in Contracts

Answer 14

Trustee personally liable absent acknowledgement in K that trustee acted “as trustee” -

trust can indemnify trustee if no breach by trustee (and sufficient funds)

Question 15

Trustee Liability in Torts

Answer 15

Only personally liable if personally at fault