Question

A trustee for a trust account wants to make an investment in a privately held limited partnership that manufactures flight simulators. The trustee has previously invested in other limited partnerships and has made money in some of the ventures and lost money on others. The trustee is also a pilot and will get a discount if he uses the company's flight simulators for required annual flight training. Which statement is TRUE?

A. The trustee is prohibited from making the investment because of the potential for a total lossB. The trustee is prohibited from making the investment because he will derive a personal benefitC. The trustee is prohibited from making the investment because limited partnerships are not publicly tradedD. The trustee is permitted to make the investment if this is in the best interests of the beneficiary

Answer 1

The given statement "The trustee is prohibited from making the investment because he will derive a personal benefit" is true.

Answer: Option B

Step-by-step explanation:

Law has bestowed the trustee with the management of trust property and funds as a reasonable prudent man. It is expected that a trustee will essentially work for the benefit of the trust only and will always act with skill, reasonable care and caution.

Where trustee has personal interest in the prospective investment company, it is prohibited for the trustee to invest in such company as his personal interest will always effect his decision and he may make a wrong investment.