STEP Fiduciary Responsibilities and Ethics 3

Question 1

Which of the following best describes the 'no-conflict rule' as applied to trustees?

Accepted Answer

Trustees must not place themselves in a position where their personal interests conflict with their duties

Answer

The no-conflict rule prohibits fiduciaries from allowing personal interests to compete with or override their duty to beneficiaries.

Question 2

A trustee receives a commission from a third-party financial institution for placing trust assets in that institution's products. Without disclosure and consent, this is best characterized as:

Accepted Answer

An unauthorized profit in breach of fiduciary duty

Answer

Secret profits made by a fiduciary from their position must be disgorged regardless of whether the trust suffered any loss.

Question 3

In the context of discretionary distributions, which standard best describes the 'fraud on a power' doctrine?

Accepted Answer

A trustee distributing to a non-object of the power for their own benefit

Answer

Fraud on a power occurs when a trustee exercises a discretionary power for an improper purpose, such as benefiting a non-object or themselves.

Question 4

A trust protector has the power to remove and replace trustees. What fiduciary standard, if any, applies to the trust protector's exercise of this power?

Accepted Answer

The trust protector must exercise the power in good faith for the benefit of the beneficiaries

Answer

Courts increasingly hold that trust protectors exercising significant powers over trust administration owe fiduciary duties to beneficiaries.

Question 5

When administering a charitable trust, which fiduciary duty is uniquely elevated compared to a private trust?

Accepted Answer

Duty to further the charitable purpose and act for the public benefit

Answer

Charitable trustees owe their primary duty to advancing the charitable purpose for public benefit, enforceable by the Attorney General rather than private beneficiaries.

(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 3