IL Bar Practice Questions - Illinois Bar Examination Exam

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A settlor creates an irrevocable trust naming a trustee to manage assets for named beneficiaries. The trustee invests all trust funds in a single speculative stock that collapses. Which duty did the trustee most likely breach?

The duty to register the trust with the IRS The duty to maximize returns at any cost The duty of prudent investment, including diversification under the prudent investor rule The duty to favor income beneficiaries over remainder beneficiaries

Correct Answer:

The duty of prudent investment, including diversification under the prudent investor rule

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