FL Trusts

Question 1

anti-lapse

Answer 1

The testator didn’t change his will after the intended beneficiary died anti-lapse statute will apply

It will go to the dead person’s descendants
> applies only to grandparents of the testator and their descendants
> so the testator’s grandparents, parents, children, and siblings. + to descendants of those relatives like uncles, aunts, nieces, nephews (not great-parent bc we’re going down not up)

Doesn’t apply if testator’s will shows contrary intent to its application.

Question 2

When may a court modify, reform, or terminate an irrevocable trust?

Answer 2

1) If not inconsistent with the settlor’s purpose where
(a) trust has been fulfilled or become illegal or impossible
(b) compliance would defeat or substantially impair the material purpose
or
(c) material purpose no longer exists;
2) When in the beneficiaries’ best interest
3) It determines that the value of the trust property is insufficient to justify the administration costs
4) To correct mistakes; or
5) To accomplish the settlor’s tax objectives

Question 3

What are the two circumstances in which a trust may be unfunded?

Answer 3

Pour-over trust
> typically funded at the time of the settlor’s death by a devise in the settlor’s will; and

Life insurance trust
> trust property that consists of the trustee’s right to receive death benefits (e.g., proceeds from a life insurance policy, annuity, death benefit).

Question 4

What is the difference between a mandatory trust and a discretionary trust?

Answer 4

Mandatory trust:
> Trustee must make distributions from the trust to the beneficiaries.

Discretionary trust:
> Trustee is given at least some discretion in making distributions from the trust to the beneficiaries.

Question 5

Is property held in a revocable trust subject to the claims of the settlor’s creditors during the settler’s lifetime?

Answer 5

yes

Question 6

must a trust contain property to be valid?

Answer 6

Yes, a valid trust must generally contain some property that was owned by the settlor at the time the trust was created and was at that time transferred to the trust or to the trustee.

Question 7

Fill in the blank. To be valid, a trust generally must name at least one ________beneficiary.

Answer 7

Definite
> a beneficiary is definite, even if unborn at the time the trust is created, provided such beneficiary will be identifiable by the time the beneficiary’s interest must vest under the Rule Against Perpetuities).

Question 8

When is the cy pres doctrine applied by a court to modify or terminate a trust?

Answer 8

When
(i) a particular charitable purpose becomes unlawful, impracticable, impossible to achieve, or wasteful; and
(ii) trust property may be applied or distributed, in whole or in part, in a manner consistent with the settlor’s charitable purposes.

Question 9

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

Answer 9

Yes, in the absence of a contrary statutory provision or a provision in the trust instrument

Question 10

How is a private express trust created?

Answer 10

by
(i) a transfer of property to another person as trustee either during the settlor’s lifetime or by will or disposition taking effect on the settlor’s death;
(ii) a declaration by the owner of property that the owner holds identifiable property as trustee; or (iii) an exercise of a power of appointment in favor of a trustee.

Question 11

What claims against a beneficiary are not precluded by a spendthrift clause?

Answer 11

(i) support claims by a spouse, an ex-spouse, or a child support

(ii) claims by a judgment creditor who has provided services for the protection of a beneficiary’s trust interest; and

(iii) claims of the federal government or the State of Florida.

Question 12

What is a breach of trust?

Answer 12

A violation by a trustee of a duty that the trustee owes to a beneficiary is a breach of trust.

Question 13

are ex spouses affected if they were included in a revocable trust before divorce?

Answer 13

Yes,
If a revocable trust is executed by a husband/wife prior to divorce, any provision affecting the settlor’s spouse is void upon divorce unless the trust instrument or divorce judgment states otherwise.

Question 14

can creditors claim future distributions from a spendthrift trust?

Answer 14

No,
A spendthrift trust prevents the beneficiary’s creditors from reaching an interest or distribution before it is received by the beneficiary.

Unless, they’re an exception creditor:
> a spouse, ex spouse, or child claiming support
> a judgment creditor who has provided services for the protection of a beneficiary’s trust interest or
> the federal gov’t or State of Florida

Question 15

what does a revocable inter vivos trust with a provision disposing of trust property upon the settlor’s death, other than to the settlor’s estate, require to be valid?

Answer 15

to be executed with the formalities required for a will
(e.g., signed by two witnesses)

Question 16

If a trust mandates to favor one beneficiary over another, must the trustee adhere to that or remain impartial?

Answer 16

Adhere to it bc
> A trustee’s duty of impartiality may be eliminated if the trust terms require the trustee to favor one beneficiary over another.

Question 17

Can a creditor make a trustee pay them out?

Answer 17

When a trustee has discretion to make a distribution to a beneficiary, the beneficiary’s creditor may not attach or reach the beneficiary’s interest in the distribution before it is made.

They can seek payment from the beneficiary who has received a distribution from the trust.

Question 18

who has standing to enforce rights under the trust?

Answer 18

Beneficiaries

> A person or entity who benefits only incidentally or indirectly from the operation of a trust is not a trust beneficiary and lacks standing to sue to enforce rights under the trust.

Question 19

can a settlor protect himself from a creditor’s claim by placing property in a trust

Answer 19

No,
property held in a revocable trust generally is subject to the claims of the settlor’s creditors during the settlor’s lifetime

unless:
the property is held in an irrevocable trust that the settlor is not a beneficiary in, then the settlor’s creditor cannot reach the trust.

Question 20

can creditors go after a settlor’s irrevocable trust that they’re not a beneficiary in?

Answer 20

A settlor’s creditors cannot reach property held in an irrevocable trust in which the settlor is not a beneficiary.

*a trustee’s creditors are unable to reach the assets of the trust they oversee

Question 21

when can a court terminate a trust?

Answer 21

A court may exercise its discretion to terminate a trust upon the application of the trustee or any qualified beneficiary, but such discretion must be exercised in a manner that conforms as far as possible with the intent of the settlor.

Question 22

when may a trustee be replaced?

Answer 22

when there has been a substantial change in circumstances and the court finds that
(1) trustee removal best serves beneficiaries’ interests,
(2) removal is not inconsistent with a material purpose of the trust, and
(3) a suitable successor is available.

Question 23

you future earnings/property interest be used to fund a trust?

Answer 23

Yes, any full or fractional property interest may be used as trust funds, including future interests (whether vested or contingent).

Future earnings under an existing contract may also be used to fund a trust.

Question 24

true or false:
Support awards against a beneficiary of a spendthrift trust may be enforced against the beneficiary’s interest in distributions from the trust.

Answer 24

true

Question 25

When the last account holder of a Totten trust dies, how is the account balance distributed?

Answer 25

When the last account holder of a Totten trust dies, the account balance is distributed equally among the surviving beneficiaries.

Question 26

can a settlor change/amend/modify the trust?

Answer 26

Yes; a trust is presumably revocable and if the settlor is still alive they can change the instructions of the trust even if they contradict the terms already there

Question 27

A rebuttable presumption that a trustee violated the duty of loyalty arises when a transaction related to trust property is entered into with a close associate of the trustee, including a company in which the trustee possesses an interest that may affect his or her judgment.

What factors can rebutt that presumption?

Answer 27

> the fairness of any consideration involved
whether the terms of the transaction are similar to those that would be found in an arms-length transaction involving an independent party.

Question 28

Is an exculpatory clause that excuses a trustee’s breach of trust enforceable?

Answer 28

no, its unenforceable if attempts to relieve the trustee of liability for

a breach of trust
> committed in bad faith or
> with reckless indifference to the purposes of the trust or the interests of the beneficiaries.

Question 29

If there is a vacancy in a trusteeship that is required to be filled wat’s the order of priority to look to when trying to find someone to fill in as trustee?

Answer 29

A vacancy in a trusteeship that is required to be filled must be filled in the following order of priority: (1) by a person designated as a successor trustee
(2) by a person appointed by unanimous agreement of the qualified beneficiaries, or
(3) by a person appointed by the court.

Question 30

True or False:
A irrevocable trust may be terminated by the consent of all beneficiaries and the settlor, even if termination is inconsistent with a material purpose of the trust—e.g., a spendthrift provision.

Question 31

In Florida, a trustee who commits a breach of trust is liable for what?

Answer 31

whichever is greater of
(i) the amount required to restore the value of the trust if the breach had not occurred, or
(ii) the profit made by reason of the breach.

Question 32

In Florida, when is a life insurance trust is created?

Answer 32

when a life insurance policy designates the trustee of a trust as the policy beneficiary

On the insured’s death, the policy proceeds are distributed in accordance with the trust’s terms.

Question 33

If a settlor has created a self-settled irrevocable trust—i.e., an irrevocable trust in which the settlor is also a beneficiary, can a creditor of the settlor reach the maximum amount that can be distributed to the settlor or for the settlor’s benefit?

Answer 33

yes

Question 34

A trustee violates the duty of loyalty by engaging in self-dealing (e.g., buying trust property). The “no further inquiry” rule states that no further inquiry is necessary if self-dealing is established because self-dealing is a per se breach of the duty of loyalty.

Answer 34

so it doesnt matter if afterwards they acted in good faith if the initial thing they did was self-dealing/self-serving

Question 35

can a trustee delegate his investment functions to an agent

Answer 35

yes; The trustee must exercise reasonable care, judgment, and caution in selecting the agent, establishing the parameters of delegation, and monitoring overall performance.

Question 36

What is the standard by which trust property must be described?

Answer 36

Reasonable certainty

Question 37

When will a trust automatically terminate?

Answer 37

when the trust expires, is revoked, is properly distributed pursuant to the terms of the trust, or when all of the trust purposes have been accomplished.

Question 38

In Florida, can the same individual serve as sole trustee and sole beneficiary of a trust?

Answer 38

no

Question 39

What is a spendthrift provision?

Answer 39

stops a beneficiary from thwarting the purpose of the trust and gaining immediate access to funds that cannot be distributed under the trust terms.

Not only is a beneficiary prevented from transferring her interest, but the beneficiary’s creditors are not able to attach that interest.

Question 40

TRUE or FALSE: In Florida, a passive trust is a valid express trust.

Answer 40

FALSE: a trustee must be given specific duties. A passive trust (a trust in which the trustee’s only duty is to pass property to a beneficiary) is not a valid express trust.

Question 41

RAP in FL

Answer 41

A non-vested property interest in a trust is invalid unless (i) at the time the interest is created, it is certain to vest or terminate no later than 21 years after the death of an individual then alive; or (ii) the interest either vests or terminates within 1,000* years after its creation.

Question 42

In Florida, if a revocable trust is executed by a husband or wife as the settlor but then the couple obtains a divorce, what happens to the provisions of the trust that affect the settlor’s ex-spouse?

Answer 42

makes it void

unless the trust or the judgment for divorce expressly provides otherwise.

Question 43

What is the anti-lapse rule in Florida?

Answer 43

a substitute gift is created in the beneficiary’s surviving descendants. If there are no surviving descendants, then the interest lapses.

Question 44

Regardless of whether the trust contains a spendthrift provision, can a beneficiary’s creditor generally attach the beneficiary’s interest in a discretionary distribution before it is made?

Answer 44

No; when a trustee has discretion to make a distribution to or for the benefit of a beneficiary, a beneficiary’s creditor generally may not attach or otherwise reach the beneficiary’s interest in the discretionary distribution before it is made. This restriction applies to any beneficiary creditor.

Question 45

Are charitable trusts subject to the Rule Against Perpetuities?

Answer 45

No, they may continue indefinitely.

Question 46

A settlor may revoke or amend a revocable trust.

If the revocable trust is created or funded by more than one settlor, then each settlor generally may revoke or amend the their contribution WITHOUT the other settlor’s permission

Question 47

A private express trust is created when a settlor clearly expresses a present intent to transfer property ownership to a trustee for the benefit of one or more definite (or ascertainable) beneficiaries.

Answer 47

ex:
Ann told many family members that she was holding a sculpture for her nephew and intended to transfer possession. then died

nephew entitled to the sculpture

Question 48

can a beneficiary transfer his interest in the trust if it has a spendthrift clause?

Answer 48

No;

If the trust instrument contains a spendthrift clause, a beneficiary cannot transfer his interest in the trus

Question 49

A surviving spouse who previously signed a valid prenup containing a support provision or a valid waiver of the intestate estate can’t qualify as a pretermitted spouse.

Question 50

unless a will directs that a lien on specifically devised real property be paid, the beneficiary takes the property subject to the lien.

Answer 50

so if you get devised a house and it has a mortgage on it, you have to keep paying it doesnt just go away

Question 51

a settlor cant do what they want w a trust, they have to follow its rules

Answer 51

> settlor may amend or revoke a revocable trust by substantial compliance w the trust’s terms

> settle/ irrevocable needs everyone spermission to change

Question 52

A charitable trust must have a stated charitable purpose and, unless the beneficiary is a charitable organization, indefinite beneficiaries (e.g., a community at large).
When the terms of the charitable trust do not indicate a particular beneficiary, the court may select one or more beneficiaries consistent with the settlor’s intent.

Answer 52

In addition to the settlor, trustee, or a qualified beneficiary, the Florida Attorney General has standing to enforce a charitable trust.

Question 53

As long as a trust is revocable, the trustee’s duties—including the duty to keep records regarding the trust assets and to render an accounting—are owed exclusively to the settlor.