Mountain Ridge Bank has been named trustee for a $100,000 trust Fred and Martha Betts established for "the living children of the grantors." List the requirements for establishing a trust. Identify the primary obligation of the trustee, and discuss the fiduciary duty of the trustee.
What will be an ideal response?
There are four requirements for establishing a trust: legal capacity of the grantor; appointment of at least one trustee; specific beneficiaries, although they may be listed as a class rather than by name; and specific assets to be the trust property. The primary obligation of Mountain Ridge Bank as the trustee is to carry out the terms of the trust. In carrying out the terms, the trustee has a fiduciary duty to the beneficiaries. The fiduciary duty includes a duty of loyalty (in managing the trust, Mountain Ridge must put the interest of the beneficiaries first, disclose any relevant information to them, not commingle its own assets with those of the trust, not do business with the trust, and not favor one beneficiary over another). The trustee also has a duty of care, acting as a reasonable person would when managing the assets of another. The trustee must make careful investments, keep accurate records, and collect debts owed to the trust.
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