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Question 1
Wanda, as the trustee for an apartment building, held in trust for her nephew, Taylor, signed a renewal contract with the management company that manages the building. She signed the contract: "Wanda O'Donnell, Trustee." Wanda is personally liable on the contract?
Correct Normally, a trustee is personally liable to all parties with whom the trustee contracts in the course of the trust administration, unless she specifically limits her personal liability. Here, Wanda did not add a disclaimer to her signature that explicitly limited her liability. As such, she is personally liable on the contract.
Incorrect! Normally, a trustee is personally liable to all parties with whom the trustee contracts in the course of the trust administration, unless she specifically limits her personal liability. Here, Wanda did not add a disclaimer to her signature that explicitly limited her liability. As such, she is personally liable on the contract.
Correct
Incorrect!
Question 2
Wesley, as co-trustee of a trust, continues to operate the settlor's business, a retail store. A shopper is injured at the store because of negligence of an employee. Who is liable for the shopper's injury?
Correct
Incorrect!
Correct Generally, a trustee is personally liable for torts committed by the trustee or his agent(s) in the course of administering the trust. Here, Wesley was running a store as part of administering the trust. Since one of the store's employee's was responsible for the shopper's injury, Wesley becomes the liable person, since the employee was his agent. However, Wesley may seek indemnification from the trust because Wesley was not personally at fault. See, e.g., Johnston v. Long, 181 P.2d 645 (Cal. 1947).
Incorrect! Generally, a trustee is personally liable for torts committed by the trustee or his agent(s) in the course of administering the trust. Here, Wesley was running a store as part of administering the trust. Since one of the store's employee's was responsible for the shopper's injury, Wesley becomes the liable person, since the employee was his agent. However, Wesley may seek indemnification from the trust because Wesley was not personally at fault. See, e.g., Johnston v. Long, 181 P.2d 645 (Cal. 1947).
Correct
Incorrect!
Question 3
Asa is the trustee of a trust that contains negotiable securities in trust for Carla and Jeffery. For safekeeping, Asa placed the securities in a safe deposit box at the most prominent bank in town. One night burglars break into the bank and steal the securities. Asa is personally liable for this loss.
Correct
Incorrect!
Correct A trustee is held personally liable for any loss attributable to his breach of duty. Here, Asa took the necessary precautions to keep the trust property safe. A reasonably prudent person would also place securities in a safe deposit bank at a major bank for safekeeping. Since Asa did not breach his fiduciary duty, he would not be personally liable for the loss.
Incorrect! A trustee is held personally liable for any loss attributable to his breach of duty. Here, Asa took the necessary precautions to keep the trust property safe. A reasonably prudent person would also place securities in a safe deposit bank at a major bank for safekeeping. Since Asa did not breach his fiduciary duty, he would not be personally liable for the loss.
Question 4
Misty is the trustee of $60,000 for Tabitha for life and then for Ileana, which Misty has invested at 3% interest. For many years Misty, who lives in Portland, OR, has been sending a regular monthly check for $150 to Tabitha, who lives in Seattle, WA. Tabitha dies but Misty does not find out about her death. Meanwhile, Misty continues to send the checks, which are cashed. Misty never looks at the returned checks in her bank statement; otherwise, she would have discovered that the endorsements were forgeries. This continues for three years after Tabitha's death. Who was entitled to those checks?
Correct
Incorrect!
Correct A trustee is obligated to diligently protect the trust assets and take an active role in carrying out her duties. Here, although Misty performed part of her duties (sending the checks), she never bothered to take the additional steps to protect the trust's assets by reviewing the cancelled checks monthly. This oversight caused her to pay out trust assets to someone other than a trust beneficiary. Accordingly, Misty is liable to Ileana for the amount she was supposed to receive over those three years (or $5,400).
Incorrect! A trustee is obligated to diligently protect the trust assets and take an active role in carrying out her duties. Here, although Misty performed part of her duties (sending the checks), she never bothered to take the additional steps to protect the trust's assets by reviewing the cancelled checks monthly. This oversight caused her to pay out trust assets to someone other than a trust beneficiary. Accordingly, Misty is liable to Ileana for the amount she was supposed to receive over those three years (or $5,400).