A trustee can only exercise express or implied powers.
The terms that created the trust grant the express powers to ____.
In addition, the trustee can exercise certain implied powers that will be examined below.
Certain powers that were implied at CL are now expressly conferred by the Uniform Trust Code (UTC).
Standard of care required of trustee?
A trustee is in a fiduciary relationship to the trust and its beneficiaries.
The trustee must exercise that degree of care, skill, and prudence that would be exercised by a reasonably prudent person in managing her own property.
What is the Duty of loyalty owed by trustee?
A trustee owes a duty of undivided loyalty to the trust and all its beneficiaries.
How should the trustee allocate assets?
All assets received by the trustee must be allocated to the trust principle or income.
Traditionally, cash dividends, interest income, and net business income are treated as income.
Traditionally, stock dividends, stock splits, and net proceeds on the sale of a trust asset are allocated to the trust principal.
However, under the Uniform Principal & Income Act, the trustee has an adjustment power to reallocate investment portfolio return.
Uniform Principal & Income Act, what is adjustment power?
Trustee's allocation of assets, which may be improper under the traditional rules, may be proper if:
1. necessary to carry out the trust purposes, and
2. allocation is fair and reasonable to all beneficiaries
Fact patterns When the adjustment power should be used?
trust purpose suggests a deviation from traditional rules should be used
some indication there needs to be a reallocation of investment portfolio returns
Purchase of a trust asset by trustee? Remember to state the remedy.
A trustee (or relative) cannot purchase any trust property. It is self-dealing.
Even if he pays full FMV, regardless of any good faith by trustee that he was acting in trust's best interests.
Remedy: set aside the transaction, recover the asset, and recover any profits (interests, dividends) made from the asset during the time it was sold.
Trustee makes a bad investment. what duties breached?
Trustee has a duty of care (of trust property), includes:
Trustee has a duty to preserve and protect the trust corpus. Implied in this duty is the duty to make the trust property productive.
Prudent investor rule: soundness of the trustee's investments is measured by the prudent investor rule, which requires that a trustee act in good faith, with reasonable prudence, sound discretion, and care in making investments.
Trustee must invest as would a prudent business person in managing her own funds, considering hte probable income and probable safety of capital.