Trusteeship and Fiduciary Duties Alternate Divisions (PoA also option, but its a shit option here b/c

e Divisions (PoA also option, but its a shit option here b/c no fiducy) & Prvt Trust Co.

Sole Trustee (Also, corporate trustee) Co-Trusteeship: Directed Trust: (Admin'v) Trustee must follow directions of 3rd pty (Trst
Settlor may name more Protector/Director) w/ respect to one/more of three main functions [ie
than one trustee, with Trustee rspnsbl for distrib & custody, but investment must be per advisor]
Delegation by Trustee: Keep trusted guy + cycle strenghts and
experts. Trustee may, per UTC 807, delegate weaknesses. Directed Trustee. (under orders)
Drctr/Prtcr

Duties
duties/powers 2 agnt. Problem: All have (a) UTC 807(c): No liability (duty follows power);
807(c): No liability IF he uses rsnbl care, skill, and is
fiduciaries duties and (b) UDTA: Trustee absolved, unless engaged in wilful
caution in (1) selection of the agent; (2) establishing fiduciary.
responsible for all misconduct.
the scope of the delegation; and (3) periodic review. aspects. [Sim, but DIff.] DUTY to Verify Good Faith of Drt?
Reform: UDTA allows UTC: Follow terms unless "manifestly contrary to trust
Delegated Agent: Owes duty of reasonable care to
separtion of liability like OR serious breach of fiduciary duty.
trust. Trustee obligated to pursue cliams against
dirct T UDTA: Trustee must always act n good faith & ensure.
agents.

Mandatory Trust Functions here Petition for Instruction. [R3Trst Sec. 71].
Unique to Trust Law.
Trustee or benef may apply to appropriate court for
ANTICIPATORY relief --> instructions re: administration or
distribution of trust if there is reasonable doubt about powers
or about proper interpretation.

Note: Text of rule excludes investment, cannot get that kind

of instruction from the court.

Judicial Accounting. (Self-Reporting, Inverse

Breach of Trust)
Trustee shall not be liable for breach of trust IFF (1) facts of
breach fairly disclosed in formal accouting filed in court; (2)
notice of accouting properly served on beneficiaries; and
(3) beneficiares do not timely objet.

Note: Accouting must be full disclosure & in good faith;

Apply this to EVERY ACTION

taken by trustee, in all functions.

Duty of Loyalty: Dilligent, Good Faith Attempt at

Best nterests per Terms of
Trustee has duty to perform all Trust: Even if no self-dealing or No Self-Dealing: Transactions between No Conflicts of Interest: If not
(1) Breach?

functions in good faith for the conflict; must act in best interests. Trustee (or spouse) and estate are direct self-D, but trustee has
best (or exclusive, if prov.) AND be per (reasonable breach. some beneficial interest.
interests of the beneficiaries. reliance on) Trust's terms.
And may NOT engage in Note: No 3rd party frauluent evasion (ie ie Make conveyance of trust
self-dealing transactions nor Breaches: Failure to sell for brother of Trustee's spouse cannot fill Prop to mercht. so merch will
conflicted transactions. FMV; sale w/o power to do so. shoes). give trustee more business.

(2) Remedies. No Further Inquiry Rule: If transaction involved either

self-D or conflicts of Int PER SE INVALID ('no futher
Selling w/o Selling for Trustee Sells (3) Liability. inquiry into underlyi)
Power of Sale: Inadequate Price: Own Prop to
Trustee
Either no power Power to sell, but no Trust: Co-trustees is liable
Buys Trust
to sell OR duty good faith attempt for wrongful acts of Exceptions:
Property: Affirmative Defenses (These are
to retain specific to sell. Beneficiary other co-trustee to (1) Corp. trustee may
exclsiv def)
asset. compel trustee which s/he consented deposit assets w/ own
Beneficiary (1) Settlor (a) explicitly authorizes
IFF no self-Deal or to repay or which, by banking dep't and
compeles self-dealing or (b) does so
Appreciation conflict mere purchase price negligence trhough mutual funds;
trustee to implicitly [structurla conflict];
Damages. difference b/w FMV and re-take inactivity or (2) Reasonable
restore the (2) Beneficiaries consented after
Trustees liable and sale price. property. (ie WRONGFUL compensation may be
property to full disclosure (beforehand);
for value of IFF self-deal: corp trustee delegation, enabled removed by Trustee;
the trust. (3) Trustee obtained advanced
property @ time Appreciation sells own stock co-trustee to commit (3) Structural conflicts
judicial approval .
of decree. damages. to trust) breach. caused by Settlor.

Plus, property acq. goes to Constructiv trust for Beneficiaries; Plus, disgorgement of
profits. [selling w/o'
NOTE: Even if it passes NFI rule, go to Duty of Impartiality.
Likely, there will be a violation of this as well; which may not
be protected by structural defesne.

Duty of prudence obligates trustee to exercise objectively reasonable due CARE, CAUTION, AND SKILL. BIG NOTE: Std of
Dut(ies) of Prudence: care is relative to trustee's expertise (ie Warrn Bufft must invest well); and (2) UTC 806 gives variable standard via special skill

Distributive Function. Investment Function. Custodial Function. [incld. Admin func.]

Trustee to make income or principal Trustee expected to preserve assets. Evolution on rules for
distributions per tersm of trust. this. [also applies to charitable trusts] Trustee holds legal title; must keep custody.

See also impartiality (prudence); See self-dealing (loyalty); see impartiality (loyalty); see Custodial: Trustee Administrative:
see also good faith per terms of duty to delegate (prudence) takes title and REcordkeeping, bringin and
trust (loy);see also duty to delegate defeinding cialms , accouting
Std. of Care

custody of propety;
(prudence) Orig: List Prudent "Man" Now: Prudent and giving info to
must safeguard.
Approach. Beat inflation; "Investor" beneficiaries, tax filings.
Discretionary Trust Distrb. Low risk, Low still low return. Stocks now,
Duties Reward. higher returns. Duty to Collect & Protect:
[UTC 809] W/o unreasonable delay, must take
Duty to Inquire: Default must property put into trust owes duty to ensure the $$
inquire to needs of beneficiary Prudent Investor Rule: Duty applies both (a) at selection of received is same as promised.
(cannot just wait for reply if hear investment; and (b) ongoing duty to monitor prudence. Scope: Context of objects, ex -> insurance for
they need $$). jewlery; FDIC bank for $$
Trsutee shall invest and manage trust assets as a prudent
Consideration of Other Income:
investor by consideriong purposes, terms, distrib. req's,
Modern trend -- trustee should Duty to Earmark Trust Property: UTC 810, Must
and other circumstances of the trust--will do so w/ rsnbl skill,
exercise judgment on others into designate as trust property in trust's name.
caution, and care.
account. [Trad: no consideration].
Note: FLUX. UPIA says diversity is mandatory. Failure: May subject res to trustee's creditors
Abuse of Discretion: If trustee States: Begining to allow intsruction to not diversify. Scope of Trustee Liability: [Mod] Only to extent the
abuses discretion (if limited), (Theory: Trusts are us. carefully arranged) failure to earmakr caused loss.
beneficiary may hold trustee liable. [Trad] Resp. for all lost non-marked prop.
Key -- Duty to Diversify Shall diversify invensntemnts Non-Commingle Corrolary: May NEVER
EX: (i) Support Trusts [mainteance unless trustee reasonably determines that, b/c of special commingle; per se breach of trust.
standard]; (ii) Sprinke [accumlate circs, purpose of trust better served w/o. Liability: Follows Mod/Trad earmark split.
income & add to princip]; (ii) Spray
[must distribute all income
i) Is there 1) Special Prop. [ie beach house]; 2) trust is Duty to Keep Adequate Records: UTC 810(a).
currently but has discretion over
whom and what amounts] exception? small pt of larger, diversified portfolio. Requires documentation of imporant decisions and
actions, as well as the trustee's reasoning for them.
Mere retention right (loyalty waiver) ? Note: UTC 806 skill stnd increases for Prof Trustee
ii) Trust diversity waiver (prudence). Retention must
Exculpation Clause Presumptively permit? be mandatory.
Duty to Bring and Defend Claims: UTC 811 ->
Invalid. Rebutt by (1) provision is
iii) How fast? "reasonable" time -> 2-3 months. Must take "reaosnable steps to enforce claism of
fair AND (2) effect of clause
adequatley disclosed to settlor. the trust and to defend claism. -> Informed by
iv) How Twenty stock rule. > 5% in one stock raises "Duty of Cost sensititivty" [must consider the
Mandatory Arbitration: signficant Diverse? questions of portfolio theory. 'likelihood of recovery and cost of suit (ie 20k suit is
split in authority. Some allow; not worth it)]
others do NOT. v) Damages. Lost capital plus interest. [NOT tot. return.]

Duty of 'Impartiality' Duty to Inform and Account

Triggered by having 2 or more beneficiaries.

Due R3Trst: Gen. Loyalty Duty (1) Duty to Propmt Response. [In flux over NON-WAIVABLE, per
Care, UTC 803: Trustee shall act implies this. [But could maybe 105(b)(9)].
not impartially in investing, managning, take sides to preserve trust / -> UTC 813(a): Trustee must respond promptly to "beneficiary's
equal and distributing the trust and shall purpose from attack by a request for information realted to adminstration of trust".
treatment. give DUE REGARD to the trustee, whereas UTC has
beneficiaries' respective interests. mandate to be impartial in Info Covered: Info reasonably related to being able to protect
mgmt. interest in trust [ie don't have to provide trust instrumt, just
terms, unless extra probs]

Must consider: (i) Any preferences the settlor may have expressed in the
governing instrument or otherwise; and;
(ii) The various and sometimes conflicting interests of beneficiaries.
(2) Duty to Affirmative Disclosure.
Must Trustee consider Other Sources of Income? NO. Unless UTC 813(c).
the Settlor specifically expressed this intent, traditional rule of Trustee has duty to make affirmative disclosure of significant
NO other sources. developments or intended transactions, in particular informaiton
need to protet interestes in trust. Give them opportunity to
OBJECT
Principal v. Income Problem: B/c of original rule,
What is NOT ROutine?: Changes in identities of trustees,
Power to Adjust UPaIA delegation of important fiduc resposibilities; changes in delgaion
Old Approach: arrangement. New management starategeis.
104 -> Trustee may shift
Life ben gets
distribution by allocating See Also :
income; principal
the income and principal UNITRUSTS. Help
to
among all, if otherwise with this too.
remainderpeople.
causes a conflict.
Created conflict.
[Default Rule]