Question

A corporate trustee may purchase its own bank stock in a fiduciary account if:

a. It is in the best interests of account beneficiaries to do so.
b. The trustor is also a director of the bank and suggests it, even though the trust agreement is silent on such investments.
c. There is a general power in the trust agreement permitting the trustee to make any prudent investments.
d. The governing instrument specifically authorizes.

Answer 1

A corporate trustee may purchase its own bank stock in a fiduciary account if it is in the best interests of the beneficiaries and is specifically authorized by the trust agreement. Simply having a general power to make prudent investments or following the suggestion of a director who is a trustor is not sufficient authorization.

Step-by-step explanation:

A corporate trustee may purchase its own bank stock in a fiduciary account under certain conditions. The primary condition is that the purchase aligns with the best interests of the beneficiaries and is authorized by the trust instrument. It's legally permissible when:

• It is in the best interests of account beneficiaries to do so.
• The governing instrument specifically authorizes such an investment.

It is not appropriate for a trustee to purchase stock based simply on the suggestion of the trustor, even if that trustor is a director of the bank, unless the trust agreement provides for such investments.

Likewise, a general power in the trust agreement, stating the trustee can make any prudent investments, may not suffice for purchasing its own bank stock without express permission or without considering the best interest of the beneficiaries.