AEP Trust Administration & Management Flashcards

A trustee who commingles trust assets with personal assets has breached which core fiduciary duty?

Answer: Duty to segregate assets

The duty to segregate assets requires trustees to keep trust property separate from their personal assets to avoid confusion and protect beneficiaries.

Under the Uniform Trust Code, what is the minimum frequency at which trustees must provide accountings to qualified beneficiaries unless the trust provides otherwise?

Answer: Annually

The UTC requires trustees to provide annual accountings to qualified beneficiaries, though the trust document can modify this requirement.

Which type of trust allows the grantor to retain the right to receive a fixed annuity payment for a specified term, with the remainder passing to heirs?

Answer: Grantor Retained Annuity Trust (GRAT)

A GRAT allows the grantor to receive fixed annuity payments for a set term, and any remaining assets pass to heirs with reduced gift tax exposure.

A corporate trustee's fee is typically calculated as a percentage of which value?

Answer: Trust corpus (principal) under management

Corporate trustee fees are generally based on the trust's principal under management, often expressed as a basis-point annual charge.

Which standard governs how a trustee must invest trust assets under the Uniform Prudent Investor Act?

Answer: Total return/portfolio approach

The Uniform Prudent Investor Act replaced the older prudent man rule with a modern portfolio theory approach focusing on total return and risk-adjusted performance.

When a trust has both income and remainder beneficiaries, a trustee's primary challenge in investment is to balance which competing interests?

Answer: Current income distributions vs. preservation of principal for remaindermen

The trustee must balance providing current income to income beneficiaries while preserving or growing the principal for eventual distribution to remainder beneficiaries.