Trusts short rules.txt

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Trusts short rules.txt
2013-07-13 00:09:31
ca bar trusts short rules

ca bar trusts short rules
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  1. Trustee's Powers
    • 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).
  2. 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.
  3. What is the Duty of loyalty owed by trustee?
    A trustee owes a duty of undivided loyalty to the trust and all its beneficiaries.
  4. 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.
  5. 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
  6. 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
  7. 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.
  8. 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.