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.
True
False
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
Choice 1 Permitted under the trust agreement.
Choice 2 A breach of fiduciary duty.
Choice 3 An implied power to sell.
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?
Choice 1 $2,000.
Choice 2 $2,000, plus lost interest.
Choice 3 Nothing, Malcolm performed his fiduciary duties.
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.
True
False
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?
Choice 1 Nothing, FBT did not violate its fiduciary duties.
Choice 2 The difference between the money paid for the stock and its depressed selling price.
Choice 3 The difference between the money paid for the stock and its depressed selling price, plus interest.

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