TRUSTEE'S POWERS AND RESPONSIBILITIES

Question 1

Trustees powers arise from either:

Answer 1

1. The trust instrument

2. Granted by statute or implied in law

Question 2

General Trustee Powers

Answer 2

1. Settle or abandon trust claims
2. Borrow money
3. Sell or lease trust assets
4. Incur reasonable expenses necessary to maintain trust property

Actions within these areas are questionable if he abused his discretion in undertaking conduct.
STANDARD:
Is the move toward the health, education, maintenance, and support of the beneficiary

Question 3

Trustee fiduciary duties

Answer 3

Duty of Loyalty and Good Faith

Trustee prohibited from:

1. Self-dealing
2. Obtaining any personal benefit (other than agreed upon or statutory fees)
3. Interacting or conducting business transactions with beneficiaries unless the transaction is fair and all facts are disclosed.

Question 4

Prudent Business Person rule

Answer 4

Trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, an other circumstances of the trust, while exercising reasonable care

When a trustee possesses superior business expertise his standard is higher to represent such skill

Trustee must use trust property in productive, prudent manner. Modern investment theory permits the trustee to make investment determinations based on the total portfolio balancing risk and return

Question 5

Delegation of Trustee Duties

Answer 5

Trustee may not generally delegate his duties.

Trustee may delegate investment functions if:

1. He is diligent in selecting his advisor
2. Trustee must inform beneficiaries of the delegation

Question 6

Trustee’s Liability

Answer 6

If trustee uses trust assets to buy property, he will have to return both the trust property and its appreciation in value

If trustee breaches duty of care they must personally re compensate for the trust losses, trust interest

A successor trustee is not liable for the conduct of his predecessor if :
1. He knew or should have become aware of the prior trustee’s breach
2 and failed to undertake action to minimize its effects or pursue appropriate remedies on behalf of the beneficiaries.

Beneficiary will be found to have waived the trustee’s breach or be estoped from asserting an action if:

1. He has full knowledge of material facts
2. Expressly approves of the complained-of action by the trustee

Question 7

Exculpatory Clause

Answer 7

Provision that relieves the trustee of liability for potentially wrongful acts.

Question 8

Removal and Resignation of Trustees

Answer 8

Trustee may be removed for cause (breach of duty, incapacitation)

Successor trustee has all rights and duties of previous predecessor