Trust Administration

Question 1

Powers of the trustee

Answer 1

Trustees have all the enumerated powers expressed in the trust itself and pursuant to the law. Trustees have the implied powers necessary and appropriate to carry out the terms of the trust, such as to sell or lease trust property, incur reasonable expenses, borrow money, or operate a business.

Question 2

Duties of the trustee

Answer 2

1. Account to and inform the beneficiaries with a statement of income.
2. Not Delegate his trustee duties to others
3. be Impartial when dealing with the income beneficiaries and remainderman beneficiaries.
4. use Due care and act as a reasonably prudent person
5. Segregate and Earmark trust funds and not commingle the funds
6. duty of Loyalty
7. prudently Invest the trust property
8. Defend actions that may result in a loss to the trust
   {AND I DID SLIDE}

Question 3

Duty to Prudentially Invest

Answer 3

Trustee must prudentially invest the trust property to make it productive for the beneficiaries under one of the following methods depending on the jurisdiction:

a. Common law utilizes various lists of good investments which include federal gov’t bonds, federally insured CODs, first deeds of trust in real estate, and stock of publically traded corporations
b. Uniform Prudent Investor Act

Question 4

Uniform Prudent Investor Act (UPIA)

Answer 4

adopted in a majority of jurisdictions, provides that a prudent investor’s performance is measured in the context of the entire trust portfolio as a whole and as part of an overall investment strategy having risk and return objectives reasonably suited to the trust.

Question 5

Liabilities of the Trustee

Answer 5

A trustee is personally liable for:

1. Violating his trustee duties.
2. Torts committed by him, and his agents if they were committed within the scope of supervision, against third parties.
3. Contracts made within the scope of his trust supervision, unless contract itself provides otherwise.

Question 6

Liabilities of Third Parties

Answer 6

1. Transfer of property to a bona fide purchaser cuts off a beneficiary’s interest, but if the transfer is not to a bona fide purchaser, then the beneficiary can set aside the transaction.
2. A third party who knowingly receives trust property will hold that property as a constructive trustee and will be liable for any losses to the trust.

Question 7

Allocation of a Trust

Answer 7

1. Beneficiaries of trust are entitled to income from interest income, cash dividends, and net business income, but must pay interest on any loan debt, taxes, or minor repairs.
2. Remainderman of a trust are entitled to principal from the net proceeds on the sale of an asset, stock dividends, and profits from sale of stock, but must pay the principal part of the loan debt and for major repairs.
3. Subject to the trustee’s best judgment: The trustee can utilize his best judgment in carrying out the terms of the trust to follow the settlor’s intent even if this requires him to disregard the above rules and provide for a different allocation.