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
Under the Uniform Prudent Investor Act, which factor is NOT explicitly listed as relevant to the trustee's investment decisions?
Answer: The trustee's personal investment philosophy
The UPIA requires trustees to consider economic conditions, beneficiary resources, tax consequences, and other objective factors — not the trustee's personal investment preferences.
A trust document is silent on trustee compensation. In most states, the trustee is entitled to:
Answer: Reasonable compensation based on services rendered
When a trust is silent on compensation, most state statutes and the Uniform Trust Code allow the trustee to receive reasonable compensation for services.
A trustee fails to file required tax returns for a trust, resulting in penalties. This is most likely a breach of:
Answer: Duty to administer the trust prudently
The duty to administer the trust prudently encompasses compliance with all legal and tax filing obligations on behalf of the trust.
When a co-trustee disagrees with the majority on a trust decision, which action is most appropriate under the Uniform Trust Code?
Answer: The dissenting trustee should document the objection to avoid personal liability
A dissenting co-trustee who records their objection is generally protected from liability for the majority's improper decision under the UTC.
Which type of trust provision protects a beneficiary's interest from claims of the beneficiary's creditors?
Answer: Spendthrift clause
A spendthrift clause prevents beneficiaries from voluntarily transferring their trust interests and shields those interests from creditor attachment.
A trustee who has a conflict of interest in a transaction but proceeds without disclosure is most likely violating the duty of:
Answer: Loyalty
The duty of loyalty requires the trustee to act solely in the beneficiaries' interests and to disclose any conflicts of interest before proceeding.
In a trust with both income and remainder beneficiaries, converting a traditional trust to a 'unitrust' primarily addresses:
Answer: The impartiality problem between current and future beneficiaries
Converting to a unitrust (distributing a fixed percentage of assets) balances income and remainder beneficiary interests better than a traditional income-only distribution.