Trust Administration & Fiduciary Duties Flashcards
7 cards from real CES practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Trust Administration & Fiduciary Duties flashcards as text
A trustee distributes principal to an income beneficiary without express authority in the trust document. This action is:
Answer: A breach of the trustee's duty to follow the trust terms
Trustees must adhere to the trust instrument's terms; distributing principal without authority constitutes a breach of duty regardless of beneficiary consent.
Which of the following is an example of an 'in terrorem' clause in a trust?
Answer: A clause forfeiting a beneficiary's interest if they contest the trust
An in terrorem (no-contest) clause threatens forfeiture of a beneficiary's share if they challenge the validity or terms of the trust.
Under the total return investing approach sanctioned by the UPIA, a trustee should evaluate investment performance:
Answer: On a portfolio-wide basis considering both income and capital appreciation
The UPIA adopts a total return approach, evaluating the portfolio as a whole rather than requiring each asset to generate income.
A trustee holds a mortgage on trust property that is underwater. Which action best fulfills fiduciary duty?
Answer: Evaluate whether holding, selling, or restructuring best serves beneficiary interests
Prudent administration requires the trustee to analyze all options — holding, selling, or restructuring — and choose the course that best serves the totality of beneficiary interests.
A trustee who is also a beneficiary of the trust must:
Answer: Administer the trust solely in the interest of all beneficiaries, not personal gain
A trustee-beneficiary may serve in both roles but must administer the trust for all beneficiaries' benefit and cannot use the trustee role to advantage their own beneficial interest.
Which document typically governs the process for a trustee to formally resign?
Answer: The trust instrument and applicable state trust statute
Trustee resignation procedures are governed first by the trust instrument's terms, supplemented by the applicable state trust statute (such as the UTC).
A beneficiary requests information about trust assets. Under the Uniform Trust Code, a trustee's duty to inform and report applies to:
Answer: Qualified beneficiaries, including current and first-in-line remainder beneficiaries
The UTC defines 'qualified beneficiaries' as current distributees, permissible distributees, and first-tier remainder beneficiaries — all of whom have reporting rights.