Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

PABar - Trusts > Creditors, Trustee Duties, and Income/Principal > Flashcards

Creditors, Trustee Duties, and Income/Principal Flashcards

1
Q

Is a beneficiary’s equitable interest in trust property alienable?

A

Yes, unless the trust limits it

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When can a creditor reach a beneficiary’s equitable interest?

A

To the extent the beneficiary can reach the interest herself

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is a spendthrift trust?

A

A trust that expressly restricts the beneficiary’s power to transfer his equitable interest.

Often inserted to protect beneficiaries from themselves

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Against whom are spendthrift clauses unenforceable?

A

When the creditors are:

  1. Against Children and spouses entitled to support;
  2. Against People who have provided basic necessities to the beneficiary; and
  3. Against Holders of federal or state tax liens
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

When does a trust terminate?

A

When the purpose has been accomplished or at expiration of an express trust term

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

When can someone block a premature trust termination?

A

When it has an unfulfilled material purpose

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Are spendthrift clauses material purposes of a trust?

A

Yes, they are presumed as such under PA law

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Can a trust be revoked by will under PA law?

A

Yes, but only if the trust instrument specifically provides that it is revocable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

When can a settlor modify a trust?

A

Whenever, unless the trust is expressly irrevocable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Are contingent remainders destructible in PA?

A

Yes. This means that if a contingent remainder fails to vest before or at the moment the preceding estate ended, it is destroyed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What powers does a trustee have under Pennsylvania law by default?

A
  1. All powers that an unmarried individual would have over his property;
  2. All powers reasonably necessary to administer the trust; and
  3. Other powers, such as the power to invest, operate a business, buy, sell, lease or encumber trust assets, and prosecute and defend actions
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Can a third party be held liable for their role in a breach of a trust?

A

Yes, to the extent they act with knowledge that they are breach of the trust

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a trustee’s duty of loyalty and good faith?

A

A trustee must act both reasonably (objective standard) and in good faith (subjective standard)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

If a trustee engages in self-dealing, what presumption attaches to his conduct with respect to the duty of loyalty?

A

An irrebuttable presumption of breach; no further inquiry is needed because it is a per se violation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Are exculpatory clauses for a trustee’s duty of loyalty enforceable?

A

Only to a limited extent; complete exculpatory clauses violate public policy and limited clauses are only enforceable in the absence of bad faith or unreasonableness

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What standard governs a trustee’s conflict of interest

A

If there is no self-dealing, then a conflict is assessed under a reasonable and good faith standard

17
Q

When can a co-trustee be liable for the other trustee’s actions?

A
  1. Consenting to breach;
  2. Negligently failing to prevent it;
  3. Concealing the breach or failing to compel redress; or
  4. Improperly delegating authority to co-trustee
18
Q

If a trustee transfers property to a bona fide purchaser, without knowledge and for consideration, can the beneficiary recover it?

A

No

19
Q

What duties can a trustee delegate?

A

No discretionary responsibilities, but ministerial tasks can be delegated.

Any responsibility that would be unreasonable for the settlor to require the trustee to perform

20
Q

What standard of care applies to trustees?

A

The duty to act as a man of ordinary prudence in the care of his own estate

21
Q

Under Pennsylvania’s Prudent Investor Rule statute, what duty of prudence do trustees owe for investments?

A

Largely any investment a prudent man would make under any reasonable theory of investing.

Guided by factors:

  1. Size of the trust;
  2. Nature and duration of fiduciary relationship;
  3. Liquidity and distribution requirements of the trust;
  4. Expected task consequences;
  5. Overall investment strategy;
  6. Special relationships of assets;
  7. Needs of beneficiaries, to extent known
22
Q

Is hindsight relevant to the trustee’s duty of prudence?

A

No

23
Q

What is a trustee’s duty to be impartial?

A

A trustee cannot favor one beneficiary over another

24
Q

What is a trustee’s duty to disclose?

A

A trustee must disclose complete and accurate information about the nature and extent of trust property, including allowing access and identifying possible breaches

25
Q

What is a trustee’s duty to account?

A

A trustee must periodically account for actions taken on behalf of a trust so his performance can be assessed

26
Q

What is a trustee’s duty to secure possession?

A

A trustee must secure possession of the property within a reasonable period of time

27
Q

If someone does not accept being a trustee, can they be held responsible?

A

No

28
Q

What is a trustee’s duty to maintain?

A

A trustee must maintain trust property

29
Q

What is a trustee’s duty to segregate?

A

A trustee must separate his personal assets from trust assets to ensure they cannot be switched if one outperforms the other

30
Q

When can a trustee be removed by a court?

A
  1. Breach of trust;
  2. Lack of cooperation among co-trustees;
  3. Ineffective administration; or
  4. Substantial change of circumstances
31
Q

Who can petition a court for removal of a trustee?

A
  1. The settlor;
  2. a co-trustee;
  3. Beneficiaries; or
  4. a court, sua sponte.
32
Q

Under the Uniform Principal and Income Act (UPAIA), how may a trustee characterize income and principal?

A

As necessary to fulfill trust purposes, provided:

  1. The allocations are reasonable;
  2. Do not have adverse tax consequences; and
  3. Are in keeping with the trust instrument
33
Q

Can a trustee make adjustments under the UPAIA if he is also a trust beneficiary?

A

No

34
Q

Is cash money received from an entity characterized as income?

A

Yes

35
Q

Are proceeds from life insurance policies or other contracts characterized as income?

A

No, principal, unless the contract insures the trustee against loss

36
Q

Are receipts from deferred compensation plans characterized as income?

A

Can be defined either way, but if not characterized, 10% income and 90% principal

37
Q

Are liquidating assets (i.e., assets whose value diminishes over time, like patents) characterized as income?

A

Only 10%; the other 90% is principal

38
Q

What expenses can be charged to income?

A
  1. One half of the regular compensation to the trustee and those who assist him;
  2. One half of accounting costs, court costs, and other matters affecting trust interests;
  3. All ordinary expenses;
  4. Insurance premiums for trust assets
39
Q

What expenses can be charged to principal?

A
  1. One half of the regular compensation to the trustee and those who assist him;
  2. One half of accounting costs, court costs, and other matters affecting trust interests;
  3. All payments on principal of trust debt;
  4. Estate taxes; and
  5. Environmental matters

PABar - Trusts (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions