Basic Functioning of Trusts

Question 1

Purposes

Answer 1

Providing for and protecting trust beneficiaries

Flexibility of asset distribution

Protection against settlor’s incompetence

Professional management of Property

Probate avoidance

Tax benefits

Question 2

Classifications of trusts

Answer 2

Express Trusts (including both private and charitable)

Trusts created by operation of law (resulting trusts and constructive trusts)

Question 3

Elements of a valid trust

Answer 3

Settlor with capacity and the present intent to create a trust

A sole trustee who is not the same as the sole beneficiary

Definite beneficiaries

Trust property

Valid trust purpose

Question 4

Valid Trust Purposes

Answer 4

not illegal, against public policy, or impossible to achieve, and does not violate the RAP

Question 5

Sufficient trust property

Answer 5

An existing interest in existing property. A future interest is valid, but not an interest that is not yet in legal existence. Future profits fine.

Question 6

Estoppel from disclaiming

Answer 6

A beneficiary may be estopped from disclaiming if they have exercised any dominion or control over the interest or accepted any benefits under the trust.

Question 7

Resulting trust

Answer 7

Property reverts to settlor. If a trust fails b/c no beneficiary, resulting trust imposed.

Question 8

Methods of accepting a trusteeship

Answer 8

Signing the trust or a separate written acceptance

Substantially complying with the acceptance terms in the trust instrument

Accepting delivery of trust property, exercising powers or performing duties as trustee, or indicating acceptance.

Question 9

Grounds for Removal of Trustee

Answer 9

A serious breach of trust

Serious lack of cooperation among co-trustees

Unfitness, unwillingness, or persistent failure to administer

Substantial change in circumstances

Question 10

Inter vivos trust

Answer 10

Created while settlor is alive either by declaring themself trustee for another or by the transfer of property to another as trustee

Question 11

Present intent when Settlor is Trustee

Answer 11

Declaration of Trust

Question 12

Present intent when settlor is not trustee

Answer 12

Transfer or conveyance of trust

Question 13

Requirements for pour-over gift from will to trust

Answer 13

Trust must be clearly identified from language of the will

Pour-over gift can be initial funding if: (1) the trust is IDed in the will and (2) the trust is executed before testator’s death

Question 14

Testamentary trusts

Answer 14

Trusts created in the settlor’s will

Question 15

Requirements for Testamentary trusts

Answer 15

Trust intent and essential terms of a trust must be ascertained from the will itself, from a writing incorporated into the will by reference, or from the exercise of a power of appointment created by the will

Question 16

Secret Trusts

Answer 16

Constructive trust imposed: Absolute gift in will made in reliance on the beneficiary’s promise to hold the property in trust for another. Extrinsic evidence is allowed.

Question 17

Semi-Secret Trust

Answer 17

Resulting trust implied: Gift in will to a person “in trust,” but does not name trust beneficiary. Extrinsic evidence not allowed