Duties of the Trustee Self-Quiz
Jennifer’s
will leaves her property (including the family residence) in trust for
her children. Her brother, Matthew, is the trustee. Since she wants her
children to get the home after the trust terminates, she includes a provision
in the trust agreement that forbids the trustee from selling the property.
Since the real estate market was heating up, Matthew got permission from
the beneficiaries to sell the residence. He realized a healthy profit
from the sale. Matthew’s action was permitted.
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Laila is the
trustee for her late uncle’s trust fund. One of the properties in
the trust in the personal residence her uncle owned during his lifetime.
Laila always liked the home and would not mind owning it. Several years
after her uncle’s death, the last child moved out of the home. Since
the trust allowed Laila to sell the home, she decided to buy it herself.
Laila’s action was
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Malcolm is
the trustee for property held in trust for Sabrina, his niece. One of
the assets is a $2,000 promissory note signed by Morris. The note becomes
due and is collectible. Malcolm negligently permits the statute of limitations
to run before trying to collect the debt. After the fact, Malcolm sues
Morris, who claims the statute of limitations as his defense. Morris wins
and the trust loses. What is Sabrina entitled to?
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Drake has
$25,000 in trust for Isabel. Drake opens an account at Commerce Bank,
where he also has an account, in his own name. Drake deposits the $25,000
into the new account. Drake is three months behind in paying his mortgage;
Commerce Bank is also his lender. Commerce Bank sets off Drake’s
outstanding mortgage amount from the $25,000 deposit. Drake is liable
for breach of trust.
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First Bank
of Tucson (FBT), a bank acting as trustee, buys stocks for a series of
trusts. FBT had previously adopted internal standards requiring that stocks
bought for trust accounts: (1) be rated as least B-plus or better and
(2) be issued by companies with at least $100 million in annual sales.
These safety rules were also followed by other major banks who manage
trust assets. FBT recently hired a new trust manager who purchased stocks
that failed to satisfy one of those requirements. Subsequently, the stocks
were sold at a loss, at a time when the market was extremely depressed.
If the beneficiaries sue FBT, what would they be entitled to?
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