Probate & Trust Law Section Conference Manual ... - Minnesota CLE

with the terms and purposes of the trust and cannot claim ignorance of such issues to
absolve him or herself from liability.
II. Duty of prudence. This means that the trustee must exercise reasonable care, skill
and caution in administering the trust, being mindful of the grantor’s objectives in
establishing the trust and the interests of the beneficiaries. In those cases where the
trustee has exceptional or extraordinary skills as compared to an ordinary trustee, he
or she must utilize those skills in the exercise of his or her fiduciary duty.
III. Duty to act personally, and the related duties with respect to delegation. It is
generally accepted that fulfilling all the duties of a trustee often requires advice and
assistance from outside sources. One area in particular where outside resources
may be accessed is in the area of investing trust assets, and while a trustee may
delegate such responsibilities, the trustee must exercise his or her fiduciary or
prudent discretion, along with reasonable care and skill, in delegating these duties to
qualified and competent advisors. In those situations where the trustee delegates
certain duties, the trustee acquires the additional responsibility of supervising the
agents he or she chooses. In addition to delegating certain duties to qualified
agents, the trustee may frequently seek legal advice or representation in the
administration of a trust. It should be noted, however, that the trustee remains liable
for his or her actions or inactions even where counsel has been consulted or
retained.
IV. Duty of loyalty. The trustee owes the trust beneficiaries a strict duty of loyalty,
essentially requiring the trustee to administer the trust and manage the trust assets
solely in the interests of the beneficiaries. This duty of loyalty prohibits the trustee
from self-dealing, or putting his or her interests above those of the beneficiaries. A
potential source of conflict occurs where the named trustee is also a beneficiary of
the trust. In these cases, the grantor of the trust must be aware of the potential
conflict of interest, and the trust document may need to be drafted to include
provisions addressing such potential issues.
V. Duty of impartiality. The trustee must administer the trust in a manner that is
impartial to all the beneficiaries. This includes requirements that the trustee invest,
protect and distribute the assets in an impartial manner, and also that the trustee
communicate with all the beneficiaries equally. The trustee must act with loyalty to all
the beneficiaries and balance their interests equally, as well as act with recognition of
the needs and interests of future beneficiaries.
VI. Duty to furnish information to the beneficiaries. The trustee must communicate with
the beneficiaries and keep them informed of all material facts related to the trust
which would assist them in protecting their interests, including, but not limited to,
changes in the trust or trusteeship, or transactions which significantly affect the trust
estate. At a minimum, information like annual schedule K-1s and trust accountings
should be provided to the beneficiaries.
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