Delegation by Trustee

A trustee has the authority to delegate certain investment and management tasks to others, as long as they choose the agent carefully, define the tasks clearly, and keep an eye on how the agent is performing. If the trustee follows these steps, they won't be held responsible for the decisions made by the agent.

Trustee Jane decides to hire an investment firm to manage the trust's assets. She thoroughly researches the firm, sets clear investment goals, and regularly reviews the firm's performance. When the firm makes a poor investment that results in a loss, Jane is not held liable because she properly delegated the management functions.

Delegate wisely, monitor closely, and stay liability-free!

Exams may present scenarios where a trustee fails to monitor the agent's performance adequately, leading students to incorrectly assume the trustee is liable. Students should remember that proper delegation and oversight are key to avoiding liability.

Questions often involve fact patterns where a trustee delegates responsibilities and then faces issues with the agent's performance, testing the student's understanding of the delegation standard and the trustee's oversight duties.