ㄒ尺ㄩ丂ㄒ丂 & 乇丂ㄒ卂ㄒ乇丂

Question 1

Discretionary Trust

Answer 1

Trustee has absolute discretion to make decisions regarding distribution of trust property to beneficiaries.

Beneficiaries have no right to income until trustee exercises discretion to distribute property or income.

Beneficiary’s creditors: cannot reach the trust because beneficiary cannot compel payment from the trust. Exception: if serve trustee with process, must satisfy creditor’s claims before distributing.

Question 2

Support Trust

Answer 2

Trustee is to make payments to the beneficiary as necessary for their support.

“Necessary” is not limited to bare essentials, but includes maintaining the standard of living to which the beneficiary is accustomed, as well as support for the beneficiary’s spouse and children.

Beneficiary’s creditors have same rights as for discretionary trust.

Question 3

Spendthrift trust

Answer 3

Prohibits beneficiaries from transferring their interests in the trust, either voluntarily or involuntarily. Spendthrift restriction applies only as long as the property remains in the trust, and is inapplicable after it has been paid out to the beneficiary.

• Creditors cannot reach B’s interest in the trust but distributions are reachable
• BUT most states allow certain classes of creditors to reach B’s interest notwithstanding the spendthrift clause [e.g., judicially ordered child support payment]
• some states also recognize an exception for a provider of necessities to the beneficiary [e.g., hospital bill]

Question 4

Charitable Trust

Answer 4

Trust that has the purpose of benefitting an unascertained group of people or the public at large.

Must have charitable purpose [look to effect, not testator’s intent- can be political-ish but not directed to particular party]

Can be perpetual [RAP does not apply]

Question 5

Cy Pres

Answer 5

Court can modify terms of a charitable trust to as near as possible as settlor’s original intention.

Arises when the trust’s original purpose is accomplished or becomes impractical, unlawful, or wasteful.

Question 6

Trustee’s duty to administer

Answer 6

Trustee must administer trust in good faith and in a prudent manner in accordance with the trust terms and beneficiary’s interest

Question 7

Trustee’s duty of loyalty

Answer 7

No self-dealing.

Trustee cannot enter into a transaction in which he is dealing with the trust in his individual capacity, absent approval or a contrary trust provision.

Question 8

Duty to report

Answer 8

Trustee must keep beneficiary’s reasonably informed of the trust and its administration.

Question 9

Duty of Trustee re: trust property

Answer 9

• Duty to separate trust property and keep records—trustee must not commingle trust property with his own or another trust’s
• Duty to enforce claims and defend trust—trustee must enforce claims the trust has and defend the trust against claims
• Duty to preserve property and make it productive—e..g, invest funds, lease or manage land, collect claims