Trust Administration

Front 1

What controls trustee's powers?

Back 1

NY Fiducuary Powers Act (FPA)

Front 2

What can a trustee do? (6)

Back 2

- Almost anything
1. Sell any property
2. Mortgage any property
3. Lease any property
4. Make ordinary repairs
5. Contest, compromise, or settle claims; AND
6. anything to manage the corpus of the trust

Front 3

What are the THREE things a trustee cannot do?

Back 3

1. Engage in self dealing
2. borrow money on behalf of the trust
3. Continue a business in the trust without court approval

Front 4

What are the FIVE prohibitions on self-dealing?

Back 4

1. Trustee can't buy or sell trust assets to himself
2. Cannot borrow trust funds
3. Cannot lend money to the trust
4. Cannot profit from serving as trustee; AND
5. Corporate trustee cannot buy its own stock as a trust investment

Front 5

What happens to the interest and security when a trustee lends money to the trust?

Back 5

- interest is returned to the trust; AND
- Any security given for the loan is invalid

Front 6

What does it mean that the trustee cannot profit from serving as trustee?

Back 6

- Can't take advantage of confidential information received while trustee.
- They can get appropriate trustee fees

Front 7

What are the TWO affirmative duties on self-dealing?

Back 7

1. Duty to segregate trust assets from personal assets
2. Duty to earmark trust assets by tilting them in the trustee's name as trustee

Front 8

What is the remedy for commingling funds?

Back 8

When the funds are used to by an asset:
1. If the value goes down there is a conclusive presumption that personal funds were used
2. If the value goes up there is a conclusive presumption that trust funds were used

Front 9

What are the THREE remedies for breach of fiduciary responsibilities?

Back 9

1. Beneficiary can sue to remove the trustee
2. Beneficiary can ratify the transaction and waive the breach
3. Beneficiary can sue for any loss (called a surcharge action)

Front 10

What is the no further inquiry rule?

Back 10

A breach of fiduciary duty by engaging in self dealing is an AUTOMATIC wrong and no further inquiry is needed.

- Note: neither reasonableness or good faith are defenses here.

Front 11

What is the result if a trustee engages in a prohibited transaction that sells assets to a BFP?

Back 11

- Beneficiary cannot recover from the BFP

Front 12

What must a purchaser know to defeat their BFP status?

Back 12

that the trustee was engaged in self dealing.

Front 13

What is indirect self dealing? (2)

Back 13

- Self dealing rules also apply to sales to:
1. a relative of the trustee
2. a business where the trustee is an officer, employee, partner, or principal SH.