Fiduciary Responsibilities & Professional Collaboration Flashcards

A trustee's duty to keep beneficiaries 'reasonably informed' under the Uniform Trust Code typically includes which of the following?

Answer: Furnishing annual trust accountings and responding to reasonable requests for information

Under the UTC, the duty to keep beneficiaries reasonably informed generally includes providing annual accountings and responding to reasonable requests for information about trust administration.

A financial advisor on an AEP team learns through the client relationship that a corporate client plans to announce a major acquisition next week. Using that information to trade the target company's stock would constitute:

Answer: Insider trading and a violation of both securities law and fiduciary duty

Using material non-public information obtained through a fiduciary relationship to trade securities constitutes insider trading, violating both securities laws and the advisor's fiduciary duty of confidentiality.

Which of the following best describes 'surcharge liability' as it applies to an estate planning fiduciary?

Answer: The legal obligation of a fiduciary to make beneficiaries whole for losses caused by a breach of duty

Surcharge liability refers to a court's authority to require a fiduciary to compensate the trust or beneficiaries for losses that resulted from the fiduciary's breach of duty.

An AEP serving on an estate planning team is asked by the client's adult child (who is not a client) to share information about the parent's estate plan. The AEP's proper response is to:

Answer: Decline to disclose any client information absent the client's explicit authorization

A professional's fiduciary duty of confidentiality prohibits disclosing any client information to third parties, including family members, without the client's explicit authorization.

Under the Prudent Investor Rule, a trustee who delegates investment functions to an agent and monitors the agent appropriately will generally:

Answer: Be relieved of liability for the agent's actions that fall within the scope of the delegation

Under the UPIA, a trustee who prudently selects an agent, defines the scope of delegation, and monitors performance appropriately is generally relieved of liability for the agent's investment decisions within that scope.

When an estate attorney on a planning team identifies a strategy that benefits the estate plan but creates a potential malpractice exposure for the attorney, how should this conflict be handled?

Answer: The attorney should disclose the conflict to the client and, if necessary, recommend independent counsel

An attorney with a conflict of interest must disclose the conflict to the client, obtain informed consent where permissible, and recommend independent counsel when the conflict cannot be waived.

A trustee of a charitable remainder trust (CRT) overstates the charitable deduction on the estate tax return. Which professional on the estate planning team bears primary responsibility for ensuring the accuracy of tax filings?

Answer: The CPA or tax professional who prepared and signed the tax return

The CPA or tax professional who prepares and signs the estate tax return bears primary professional responsibility for the accuracy of deductions claimed, including the charitable deduction for a CRT.