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CTFA > Fiduciary & Trust Section #1 Nature & Characteristics Of Account Relationships > Flashcards

Fiduciary & Trust Section #1 Nature & Characteristics Of Account Relationships Flashcards

1
Q

‘2 sources of trustee governance

A
  1. governing trust instrument
  2. State trust law
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2
Q

2 important references for trust professionals

A
  1. Restatement of trusts (3rd). Synthesizes court cases and opinions, explains history, nuance, importance of each principle 1935 → 2012 American law institute
  2. Uniform trust code attempt to codify and provide consistency across jurisdictions
    Uniform Law Commission
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3
Q

Legal title to property

A

Owner of public record

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4
Q

Equitable title to property

A

Owner is entitled to use and enjoy property

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5
Q

Aspects of ownership in trust

A

Split

Legal interest (legal title) = holding title to property. (trustee of a trust)

Beneficial interest (equitable title) = receiving economic benefit (use) of property. (Beneficiary of trust)

      Present interest-holder has current use, benefit or control of property
      Future interest-holder has rights to property in the future
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6
Q

2 types of implied trusts

A
  1. Constructive trust = fraud rectifying trust
  2. Resulting trust = intent enforcing trust
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7
Q

5 common law requirements for valid express trust

A

l. Intent to create trust by legally competent settlor
2. Present act or declaration by settlor
3. Existence of trust corpus
4. Naming trustee with duties to perform
5. Definite and identifiable beneficiaries

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8
Q

Types of express trusts

A

Revocable enables settlor to retain control of assets
Irrevocable cannot be revoked, terminated, amended without court order
Intervivos and testementary While alive or under will

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9
Q

Types of marital trusts (Qualify for unlimited marital deduction)

A

Power of appointment trust
Qualified terminable interest property trusts
Qualified domestic trusts
estate trusts

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10
Q

Power of appointment trust

A

Surviving spouse
general power of appointment
must be entitled to all income
Income payable at least annually
no other beneficiaries during surviving spouse’s lifetime

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11
Q

QTIP trust

A

Similar to power of appointment trust w/o general POA
Surviving spouse entitled to all’ income during lifetime
no one can benefit from principal during surviving spouses lifetime
Donor spouse retains dispositive control
QTIP election made on timely filed 706
Surviving spouse may be given limited power of appointment by donor spouse

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12
Q

Estate Trust

A

Surviving spouse and his/her estate are only allowable beneficiaries
Trustee may distribute as much of income and principal as needed
Income distributions not a requirement
Upon surviving spouses death, must go to estate
Surviving spouse may not appoint trust property during lifetime

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13
Q

Qualified Domestic Trust (QDT or QDOT)

A

At least one trustee must be US citizen or corporation

US trustee has right to withhold federal tax

Executor of donor spouse makes irrevocable election

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14
Q

A~B Estate Plan

A

Creates 2 trusts at death of first spouse

Credit Shelter/ Bypass/Family trust = assets equal to deceased spouse unused unified credit

Marital trust = everything else. Will qualify for unlimited marital deduction

No tax at death of first spouse
Bypass trust assets go to next generation tax free at second spouse death

Portability of unused exclusion

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15
Q

Income beneficiaries

A

Beneficiaries that may benefit from income generated by trust corpus

Also called current beneficiaries

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16
Q

Remainder beneficiaries

A

May benefit from trust corpus in the future

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17
Q

Split interest trust

A

Income and remainder interests split between 2 classes of beneficiaries

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18
Q

Charitable remainder annuity trust

A

Charity is remainder beneficiary

Noncharitable beneficiary annual income stream. ( must be between 5 ~ 50% of initial fmv of trust)

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19
Q

Charitable remainder unitrust

A

Charity is remainder beneficiary

Annual payment to noncharitable beneficiary ( must be between 5~50 % of annually determined fmv)

20
Q

Charitable lead trust

A

Charitable beneficiaries receive stated amount each year

Noncharitable beneficiaries get remainder interest

21
Q

Grantor retained income trust

A

Grantor receives trust income for fixed term
Corpus passes to remainder beneficiaries without being included in grantors estate
Gift tax based on remainder interest, income retained by grantor

Corpus of GRIT limited to personal residence of grantor and remainder beneficiaries immediate family members

22
Q

Grantor retained annuity trust

A

Grantor retains right to fixed annuity payments
Remaining corpus to remainder beneficiaries
Value of gift discounted by value of income stream

Corpus not limited to particular asset type

23
Q

Grantor retained unitrust

A

Grantor receives fixed % of value of trust corpus each year

24
Q

Crummey Trust

A

Effective vehicle for making annual exclusion gifts
Trust beneficiaries are given powers of withdrawal for a limited time
If the right of withdrawal is not exercised, does not count against annual exclusion because there is no gift of present interest

25
Q

Spendthrift trust

A

Prohibits beneficiary from assigning interest in the trust, either voluntarily or involuntarily
Provides protection from creditors
Trustee can withhold discretionary distributions
Trustee must still make mandatory distributions
Not effective against child support claims, spousal support, tax liens

26
Q

Uniform Probate Code

A

General principles of probate code, issues pertaining to estate adminstration

27
Q

Personal Representative

A

Fiduciary of both estate and beneficiaries

Executor = decedent died with valid will
Administrator = decedent died without will

Personal representative = broad term including both

Authority begins day probate court issues letters of administration

28
Q

Duties of personal representative

A

Locating & presenting will for probate
Locating heirs
Collecting & preserving estate assets
Prosecuting decedents lawful claims
Inventory
Accountings
File decedents final tax returns
File estate returns (elections - portability, QTIP, etc)
Distribute assets

29
Q

Guardian

A

Court appointed fiduciary that exercise authority over physical custody of incapacitated person

30
Q

Conservator

A

Court appointed fiduciary manages financial affairs of incapacitated person

31
Q

Custodian

A

Maintains and secures principal’s assets. No fiduciary dut.

32
Q

Power of attorney

A

Written document where principal grants agent authority to act for agent

Can be general or limited

Financial or health care

33
Q

Agent vs fiduciary

A

Agency title remains with principal
Agency death of principal terminates relationship
Fiduciary (trust) trustee assumes legal ownership of property

34
Q

Precatory language

A

I desire, I request
Do not create legally enforceable duty on trustee

35
Q

Types of Present Interest

A

Fee Simple - present & future interest. Outright ownership

Life Estate - use of property for life, terminates at death of holder, at holders death reverts to grantor or predetermined remainder person MARITAL TRUST IS LIFE ESTATE

Estate for Years - Holders use is limited to specified term of years, at holders death property reverts to grantor or predetermined remainder person. GRAT. QPRT.

Determinable Interest - upon occurrence (or failure of occurrence) rights revert to grantor or another predetermined remainder person. AGE, GRADES, DRUG FREE

36
Q

Types of Future Interest

A

Reversionary - property will, or may be, returned to original owner

Remainder - property will, or may, pass to successive owners at a given time or occurrence of event

37
Q

Sole Ownership

A

Titled in name of 1 person

Transfers under decedents will or intestate estate

Subject to probate

Full step up

38
Q

Joint Tenancy

A

Ownership by multiple individuals

Right of survivorship to surviving joint tenants-different than tenants in common

Decedents share passes to surviving tenants by operation of law

Not subject to probate

Step up divided by recipients

39
Q

Tenancy by Entirety

A

Form of joint tenancy only between SPOUSES

Avoids probate

40
Q

Tenancy by Entirety

A

Form of joint tenancy only between SPOUSES

Avoids probate

41
Q

Tenants in Common

A

Owned by multiple individuals

Each have separate but undivided interest

No survivorship rights

Subject to probate, unless decedents share held in non probate form of ownership

42
Q

Tenants in Common

A

Owned by multiple individuals

Each have separate but undivided interest

No survivorship rights

Subject to probate, unless decedents share held in non probate form of ownership

43
Q

Community property

A

All property acquired by spouses by joint efforts after marriage

Differs from separate property

WA, WI, NV, NM, TX, CA, ID, LA, AZ

44
Q

Probate ( Passes by Will)

A

⏺️ Sole ownership
⏺️ Tenants in Common
⏺️ Community property

45
Q

Avoids probate

A

⏺️ Joint Tenancy
⏺️ Tenants by Entirety
⏺️ Contract property w/ valid beneficiary
⏺️ Living Trust property

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