STEP Fiduciary Responsibilities and Ethics 2

Question 1

A trustee discovers that a beneficiary is pressuring a co-trustee to make unauthorized distributions. What is the primary ethical obligation of the non-pressured trustee?

Accepted Answer

Report the coercion to the court or appropriate authority

Answer

Trustees have an independent duty to act in the best interests of all beneficiaries, and coercion must be reported to protect the integrity of the trust.

Question 2

Under the prudent investor rule, how should a trustee approach a beneficiary's request to retain a highly speculative asset in the trust portfolio?

Accepted Answer

Evaluate it within the context of the total portfolio and trust objectives

Answer

The prudent investor rule requires portfolio-level analysis rather than evaluating each asset in isolation.

Question 3

Which scenario best illustrates a breach of the duty of impartiality in trust administration?

Accepted Answer

Consistently investing in income-producing assets to the detriment of remaindermen

Answer

Systematically favoring income beneficiaries over remaindermen by skewing investments violates the duty of impartiality.

Question 4

A STEP practitioner learns that a client's proposed estate plan would technically comply with the law but exploit a loophole the legislature clearly intended to close. The ethical course of action is to:

Accepted Answer

Advise the client of the risks and consider whether the plan reflects good ethical practice

Answer

STEP's ethical standards require practitioners to consider not just legality but also the spirit of the law and professional integrity.

Question 5

What distinguishes a constructive trust from an express trust in the context of fiduciary liability?

Accepted Answer

A constructive trust is a remedy imposed by courts to prevent unjust enrichment; an express trust arises from the settlor's intent

Answer

Courts impose constructive trusts as an equitable remedy where one party would be unjustly enriched without it, independent of any express agreement.

(STEP) Society of Trust and Estate Practitioners Certification Practice Test

(STEP) Society of Trust and Estate Practitioners Certification Practice Test

STEP Fiduciary Responsibilities and Ethics 2