Trust Administration and Fiduciary Duties: every key term you need (+ practice quiz)
25 flashcard terms for Wills and Trusts Topic 7, written to match the course framework. Study them here, then drill them as interactive flashcards, or test yourself with the 15-question quiz — free, no account needed.
The trustee's obligation to administer the trust solely in the interest of the beneficiaries, forbidding personal profit and any transaction in which the trustee's own interest competes.
No further inquiry rule
The traditional principle that a trustee's self-dealing transaction is voidable by a beneficiary without proof of bad faith, unfairness, or loss to the trust.
Conflict of interest transaction
A dealing between the trust and the trustee or a close associate, presumed voidable unless authorized by the terms, approved by a court, or ratified by fully informed beneficiaries.
Duty of prudence
The obligation to administer the trust with the care, skill, and caution a prudent person would use, judged by the process the trustee followed rather than by outcomes alone.
Prudent investor standard
The modern rule evaluating investments as part of an overall portfolio strategy with risk and return objectives suited to the trust, rather than scrutinizing each holding in isolation.
Prudent man rule
The older investment standard that judged each asset separately and often barred whole categories such as speculative equities, displaced by portfolio theory in the uniform acts.
Duty to diversify
The default requirement to spread investments to reduce uncompensated risk, excused only when special circumstances make retaining a concentrated position better serve the trust's purposes.
Delegation of investment functions
The modern permission for a trustee to hire agents, requiring prudent selection, clear scoping of the delegated authority, and periodic monitoring of the agent's performance.
Duty of impartiality
The obligation to balance the competing interests of income beneficiaries and remaindermen, which shapes investment allocation and the classification of receipts.
Principal and income allocation
The accounting rules deciding whether a receipt or expense belongs to the income beneficiary or the remainder interest, modernized by uniform acts permitting an adjustment power.
Power to adjust
The trustee's authority under modern principal and income legislation to shift amounts between accounts so that a total return investment strategy still treats both classes fairly.
Unitrust conversion
The statutory option of paying the income beneficiary a fixed percentage of the trust's annual value, removing the incentive to skew investments toward yield over growth.
Duty to collect and protect
The trustee's obligation to take control of trust assets promptly, secure them, pursue claims against prior fiduciaries, and insure or otherwise safeguard the property.
Duty to earmark
The requirement to title trust assets in the trust's name so that ownership is clear, historically enforced by absolute liability for losses on unearmarked holdings.
Duty not to commingle
The prohibition on mixing trust property with the trustee's own funds, which obscures tracing and exposes trust assets to the trustee's personal creditors.
Duty to inform and report
The obligation to keep qualified beneficiaries reasonably informed and to furnish periodic accountings, which is what makes the other fiduciary duties practically enforceable.
Qualified beneficiary
The Uniform Trust Code category of current and first-line remainder beneficiaries who receive notice and reports, limiting disclosure burdens to those with a real present stake.
Exculpatory clause
A provision limiting trustee liability, unenforceable as to bad faith or reckless indifference and presumed invalid when inserted by a trustee who abused a confidential relationship.
Surcharge
The monetary remedy imposing on a breaching trustee the loss the trust suffered or the profit the trustee made, whichever the beneficiaries elect.
Tracing trust property
The equitable process of following misappropriated assets into their substituted forms, letting beneficiaries claim the property or a lien on it ahead of general creditors.
Trustee removal
The court's power to replace a fiduciary for serious breach, persistent ineffectiveness, hostility that impairs administration, or a substantial change in circumstances that all beneficiaries request.
Trustee compensation
The right to reasonable payment for services, measured in the absence of contrary terms by the size of the trust, the skill required, and the customary local charges.
Modification by consent
The Uniform Trust Code route allowing settlor and beneficiaries together to modify or terminate an irrevocable trust, or beneficiaries alone if no material purpose is defeated.
Claflin doctrine
The rule that beneficiaries may not compel early termination of a trust when doing so would frustrate a material purpose of the settlor, such as spendthrift protection or staged distributions.
Equitable deviation
The power to modify administrative or dispositive terms when unanticipated circumstances would defeat the settlor's purposes, expanded by the Code and by decanting statutes.