Trust Account

B is correct. The adviser must recommend investments that align with the trust document's mandate for "conservative investments appropriate for education funding" and consider the beneficiaries' best interest. A 60% growth stock allocation contradicts the trust's conservative directive. The adviser has a duty to advise Maria that her proposed allocation violates the trust document and her fiduciary duty to the beneficiaries.

A is incorrect because while Maria is the trustee, she must follow the trust document and cannot unilaterally override its investment guidelines. Her fiduciary duty requires acting in the beneficiaries' best interest according to the trust terms. C is incorrect because minor children cannot provide investment direction; the trustee controls the account, not the beneficiaries. D is incorrect because minor beneficiaries cannot provide legal consent, and even if they could, consent does not override the trust document's investment restrictions.

B is correct. The trustee has full authority to make investment decisions and execute trades in a trust account. The trustee is designated in the trust document and has legal control over the account, though they must act as a fiduciary for the beneficiaries' benefit.

A is incorrect because beneficiaries have ownership rights to the trust assets but do not control investment decisions. They receive distributions according to trust terms but cannot direct trades. C is incorrect because the investment adviser provides recommendations and executes authorized trades, but the trustee retains ultimate decision-making authority (unless the trust grants discretionary authority to the adviser). D is incorrect because in many trusts, the grantor is not the current trustee. In irrevocable trusts, the grantor has no control after creation; in revocable trusts, the grantor is often the initial trustee but may be replaced.

B is correct. Suitability for trust accounts must be based on the beneficiaries' characteristics (age, time horizon, needs) and the trust's stated purpose, not the trustee's personal preferences. The trust document specifies education and living expenses, which requires balancing growth with preservation. The beneficiaries' ages (10-15) with distribution at age 25 provide a 10-20 year time horizon, allowing for growth but requiring prudent risk management aligned with the trust's conservative purpose.

A is incorrect because the trustee's personal age and risk tolerance are irrelevant; the trustee must act for the beneficiaries' benefit, not their own preferences. The prudent investor standard requires considering beneficiaries' circumstances. C is incorrect because while the adviser provides recommendations, suitability must be based on the beneficiaries' characteristics and trust purpose, not solely the adviser's judgment. D is incorrect because averaging ages is inappropriate; suitability focuses on the beneficiaries' needs and the trust document's mandate, not mathematical averaging of unrelated parties.

C is correct (the EXCEPT answer). Beneficiaries generally CANNOT direct investment decisions in a trust account. The trustee has exclusive authority to make investment decisions according to the trust document and their fiduciary duty. Beneficiaries have beneficial ownership and may have rights to distributions, but they do not control investment management unless the trust document specifically grants them this power (which is rare).

A is accurate: Trustees are fiduciaries and must manage trust assets prudently for the beneficiaries' benefit, putting beneficiary interests ahead of their own. B is accurate: The trust document is the governing instrument that specifies investment guidelines, restrictions, distribution schedules, and trustee powers. D is accurate: Proper suitability analysis focuses on beneficiary needs, time horizon, and risk tolerance based on the trust's purpose, not the trustee's personal investment preferences.

B is correct. Statements 1, 3, and 4 are accurate.

Statement 1 is TRUE: Trustees must follow the prudent investor standard, which requires investing as a prudent person would when managing assets for others. This includes considering risk, return, diversification, and the trust's purposes.

Statement 2 is FALSE: The investment adviser only needs authorization from the trustee, not the beneficiaries. The trustee has exclusive control over investment decisions, and beneficiaries do not provide trading authorization (unless the trust document grants them this unusual power).

Statement 3 is TRUE: The trust document is the governing instrument that specifies investment restrictions, permitted asset classes, risk parameters, and distribution requirements. The trustee must follow these provisions.

Statement 4 is TRUE: Trustees can be held personally liable for losses caused by breach of fiduciary duty, including imprudent investments, self-dealing, or violation of trust document provisions. This personal liability is a key aspect of trustee responsibility.