Fiduciary Duties and Legal Compliance Flashcards

Which of the following best describes a fiduciary's duty of loyalty?

Answer: The fiduciary must act solely in the best interests of the beneficiaries, not in self-interest

The duty of loyalty requires a fiduciary to act exclusively in the interest of the beneficiaries and avoid conflicts of interest or self-dealing.

Under the Uniform Prudent Investor Act (UPIA), how should a trustee evaluate investment decisions?

Answer: By considering each investment in the context of the overall portfolio

UPIA requires a portfolio approach where individual investment decisions are evaluated in the context of the total portfolio strategy rather than in isolation.

What is a trustee's duty of impartiality?

Answer: The obligation to balance the interests of income beneficiaries and remainder beneficiaries fairly

The duty of impartiality requires a trustee to invest and administer the trust fairly, balancing the interests of current income beneficiaries and future remainder beneficiaries.

Which legal standard defines a trustee's minimum level of care in managing trust assets?

Answer: The prudent investor standard

The prudent investor standard, codified in the UPIA, requires trustees to invest with the care, skill, and caution of a prudent investor managing a portfolio.

A trustee who profits personally from a trust transaction without beneficiary consent has committed which breach?

Answer: Self-dealing

Self-dealing occurs when a trustee enters into transactions with the trust for personal benefit, violating the duty of loyalty.

What is the primary purpose of a trust protector in modern trust drafting?

Answer: To provide flexibility by holding powers to modify trust terms or replace trustees

A trust protector holds specified powers—such as modifying administrative terms or replacing trustees—to maintain flexibility as laws and circumstances change.