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Florida Bar Subjects > FL Trusts > Flashcards

FL Trusts Flashcards

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1
Q

List characterists of the Uniform Transfers to Minors Act:

A
  1. avoids need for appointment of guardian for minor
  2. permits gifts of any type of property
  3. qualifies for a $14k annual exclusion under the federal gift tax
  4. automatically gives custodian the power to pay for the minors benefit so much of the property & its income as the custodian deems advisable for minors support & education
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2
Q

An exculpatory clause CANNOT relieve a trustee from liability for what?

A
  1. bad faith
  2. intentional breach of trust
  3. reckless indfference to purposes of trust
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3
Q

When can a beneficiary terminate or modify a trust?

A
  1. after settlors death
  2. beneficiaries unanimously consent to trustee
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4
Q

What are the categories of trusts?

A

1 - Express
- private
- charitable

2 - Implied (NOT true trusts - remedies)
- resulting
- constructive

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5
Q

What is a trust?

A

an arrangement under which the trustee holds legal title to property for the benefit of the beneficiaries

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6
Q

What are the elements of an express trust?

A
  1. a settlor (creator) w/ capacity to convey
  2. a trustee
  3. delivery of specific trust property to trustee
  4. definite beneficiaries
  5. present intent to create trust
  6. valid trust purpose

Consideration NOT required

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7
Q

What are the general ways a trust is created?

A

1 - Intervivos Trust
- created by transfer of property by the settlor during his lifetime; OR
- created by a declaration of trust by a property owner, stating he holds property as trustee in trust

2 - Testamentary Trust
- created by will

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8
Q

What is the intent needed to create a trust?

A

Intent to put legal title to property in one persons name with a duty to manage it for others

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9
Q

What provisions in a trust would violate public policy?

A
  1. prevent marriage
  2. encourage divorce
  3. encourage crime
  4. restrain right to procreate
  5. restrain right to practice religion
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10
Q

What is the rule against perpetuities when dealing with trusts?

A

A nonvested property interest in trust is valid if:
1. when interest is created it is certain to vest or terminate within 21 years after the death of a life in being; OR
2. interest actually vests or terminates within 360 years of the trusts creation

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11
Q

What happens when there is no specific identifiable trust property?

A

The corpus, the principal, or subject matter of trust
- specific interest in property to which trustees duties relate to

if no specific, identifiable trust property, trust FAILS

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12
Q

How does a trust arise, when a promise to create a trust isn’t supported by consideration?

A
  1. all elements for a valid trust are met
  2. at a subsequent time, settlor manifests an intention to create a trust

supported by consideration, trust automatic attaches when prop received

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13
Q

What happens if no trustee is named for trust?

A

Court will APPOINT a suitable trustee

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14
Q

What MUST a private trust have?

A

Ascertainable beneficiaries

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15
Q

When do beneficiaries need to be ascertained?

A

By the time their interests are to come into enjoyment

need not be ID’d at the time trust is created

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16
Q

When can a private trust exist for the benefit of members of a class?

A

When class is a REASONABLY DEFINITE one

trustee can select members in their discretion

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17
Q

What happens when a trust fails for lack of a beneficiary?

A

A resulting trust (remedy) in favor of the settlor or successors is presumed

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18
Q

What is the test for distinguishing a trust from a will?

A

Whether the transfer creates some present gift, even if that gift is of a future interest subject to divestment

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19
Q

Will placing property in a revocable trust protect it from a spouses elective share?

A

NO!

elective share includes revocable trusts

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20
Q

Explain the rules on beneficiaries being trustees

A

1 - Sole beneficiary CANNOT be sole trustee

2 - Beneficiary can be trustee, IF:
1. multiple beneficiaries; OR
2. multiple trustees

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21
Q

When are provisions of a trust, which control where the property goes after settlors death, effective?

A

When executed in the manner required for a will

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22
Q

What is a pour-over clause?

A

A clause in a will that leaves property at settlors death to previously created trust

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23
Q

When are pour-over clauses valid?

A
  1. gift to trust identified in will
  2. trust instrument executed before or with will
  3. trust executed with formalities of will
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24
Q

What is a Totten trust?

A

A totten trust is a trust where:
- Bank account depositor declares himself trustee of the account for a person who is to receive the money in the account at the time of depositrs death

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25
Q

When & how is a Totten trust revocable?

A

When –> during life

How –> By any manifestations of intent to revoke
- withdrawl of funds
- any lifetime act manifesting intent
- a specific contradictory provision in a will

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26
Q

Does a Totten trust protect the funds in the account from creditors?

A

NO!

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27
Q

Are irrevocable oral trusts of personal property enforceable?

Burden?

A

YES!

Must be proven by clear & convincing evidence

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28
Q

Are irrevocable trusts of land enforceable?

A

NO!

may be enforced by imposing a constructive trust

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29
Q

What are the formalities for a Testamentary Trust?

A

Trust intent & essential terms must be ascertained from:
- will itself
- a writing incorporated by reference
- the exercise of a power of appointment created by will

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29
Q

Explain the parol evidence rule & trusts

A

Extrinsic evidence ALLOWED

even if NOT ambiguous & to contradict

30
Q

Explain the types of Testamentary Trusts

A

1 - Secret Trust
- where a will makes a gift that is absolute on its face, but was actually made in reliance on the beneficiary’s promise to hold property in trust for another
- intended trust beneficiary may present evidence
- CLEAR & CONVINCING? constructive trust imposed on property in favor of intended trust beneficiary

2 - Semi-Secret Trust
- will makes gift but fails to name beneficiary
- the gift will fail
- Result? trustee holds property on a resulting treust for testators heirs

31
Q

Are charitable trusts subject to RAP?

A

NO!

32
Q

What is required for a charitable trust?

A
  1. May be perpetual (RAP doesn’t apply)
  2. MUST be for a charitable purpose
  3. MUST have indefinite beneficiaries (unnamed & changing class)
33
Q

Who can bring a suit to enforce a charitable trust?

A
  1. settlor
  2. qualified beneficiary
  3. attorney general
34
Q

A charitable trust must have what type of purpose?

A

Must have a purpose considered to BENEFIT THE PUBLIC
- ex: religion, medicine, science, government, research, education, advancement of humanities

35
Q

The Cy Pres doctrine applies to what types of trust?

A

Charitable trusts

36
Q

When may the court apply the Cy Pres doctrine?

A

when the specific charitable purpose is accomplished or becomes impracticable, unlawful, impossible to achieve, or wasteful, the court will apply cy pres

if very specific court usually does a resulting trust

37
Q

What does the Cy Pres doctrine allow the court to do?

A

Modify or terminate trust by directing that the trust property be applied or distributed, in whole or in part, in a manner consistent with the settlors charitable purposes, rather than permit trust to fail & become a resulting trust

38
Q

In forumulating an alternative use for the trust property, what will court do?

A

Court MUST determine the settlor’s primary purpose

Court will considr settlors other purposes too

39
Q

What is the Related Doctrine of Equitable deviation?

A

By exercising its equitable power, the court can authorize equitable deviation from a trust provision because of unforseen changed circumstances that render provision obsolete or at odds with settlors intent (can modify administrative or dispositive terms)

applies to both caritable & private trusts

40
Q

What are Honorary Trusts generally established for?

A
  1. benefit of pets
  2. care of gravesite
41
Q

How long does an honorary trust last?

A
  1. for benefit of pet –> until the pet dies
  2. not for the benefit of pet –> less than or equal to 21 years
42
Q

Can a beneficiary transfer their interest in a trust?

A

YES!

unless statute or trust say otherwise

43
Q

Can a beneficiaries creditors buy on their trust interest?

A

YES! Interest is subject to judicial sale
- to avoid, court may order trustee to pay the beneficiaries income to the creditors, until debt is satisfied

44
Q

When can a settlor’s creditors levy on property of a trust?

A

1 - Revocable Trust
- creditors may levy on property, to extent that such property, if owned directly by settlor, would not be exempt from creditors claims

2 - Irrevocable Trust
- creditor may reach distributions made for settlors benefit

45
Q

What is a Spendthrift trust?

A

One which prohibits beneficiary’s from voluntarily or involuntarily conveying trust interest to 3rd party (creditors precluded from reaching to satisfy claims)

protects beneficiary from own improvidence (benevolence)

46
Q

A Spendthirft clause CAN’T be used to protect the beneficiary from what?

A
  1. child support
  2. alimony
  3. government claims
47
Q

What is a discretionary trust?

A

One that gives trustee discretion in making distributions
- beneficiary has NO right until distribution made
- creditors have no right to distribution - BUT if creditor (1) serves trustee w/ process then trustee must 1st satisfy creditors claim before exercising his power in favor of the beneficiary

48
Q

In a discretionary trust, what can a party that is owed support obligation from a beneficiary do?

A

Child or spouse CAN’T compel distribution BUT they can get a court garnishment of future distribution

49
Q

When can trust assets be reached by a settlor’s creditors?

A
  1. Trust revocable; OR
  2. trustee has discretionary authority to make distributions to settlor
50
Q

What are the duties of a trustee?

A
  1. duty of loyalty
  2. duty to administer
  3. duty to follow prudent investment rule
  4. duty to preserve trust property + make it productive
  5. duty of impartiality
  6. duty to account & inform
  7. duty to enforce claims
51
Q

Explain the trustees duty to administer

A

Fiduciary duty to:
1. administer trust prudently
2. administer trust in good faith
3. abide by terms & purpose of trust
4. administer in best interest of beneficiary

52
Q

Explain the duty of loyalty

A

Trustees actions must ONLY be for interest of trust they CANNOT engage in self-dealing (even if favorable to beneficiary)

Self-dealing includes:
1. borrowing trust funds
2. buying or selling trust assets
3. personal loan
4. personal gain
5. personal distributions

personally liable for breach of trust under “surcharge”

53
Q

Explain the Prudent Investor Rule

Uniform Prudent Investment Act

A
  • trustee has a duty to act w/reasonable care, skill, & education in making investment decisions
  • trustee MUST act exclusively for beneficiaries & impartially

Elements of rule:
1. duty NOT to commingle
2. duty to balance return w/ potential risk
3. duty to diversify investments
4. duty to keep trust productive

54
Q

Explain the trustees duty to account & inform

A

Trustee has a duty to keep beneficiaries REASONABLY INFORMED about administration of trust

Trustee must:
1. provide qualified beneficiaries with their trustee name & address
2. notify beneficiaries that fiduciary attorney client privilege applies
3. respond to beneficiaries request for information about trust administration & provide copy of trust instrument if requested
4. if trust irrevocable, furnish an annual accounting

55
Q

What powers can trustees exercise?

A

Those powers expressly or impliedly conferred

Powers include powers:
1. expressly conferred in trust
2. that an unmarried individual has over their own property
3. that are appropriate to achieve the proper investment, distribution, & management of trust property
4. that are conferred by trust code

56
Q

If there are multiple trustees, what is the number of votes needed to act?

A

A majority

57
Q

If there is a breach by trustee, what can beneficiary do?

A
  1. ratify transaction & waive breach
  2. sue in surcharge for loss
  3. self dealing case = trace & recover property for trust
58
Q

What can acourt do if trustee breaches?

A
  1. enforce specific performance
  2. enjoin trustee
  3. compel trustee to pay money or restore property
  4. suspend trust
59
Q

When won’t a trustee be liable to the beneficiary for a breach?

A

When beneficiary:
1. consented to conduct
2. released trustee from liability
3. ratified the transaction

OR

when trustee acted on reasonable reliance on trust terms

60
Q

Can trustees be sued on contract or in Tort in representative capacity?

A

1 - Contract
- only liable if failed to reveal representative capacity & ID trust

2 - Tort
- only liable if personally at fault

if 3rd party sued trust, it can seek indemnification from trustee

61
Q

Can a settlor modify or terminate trust?

A

Yes, a settlor acting alone, can revoke, terminate, or modify a trust
- UNLESS, terms express that trust is irrevocable

62
Q

Can a court modify or terminate trust?

A

Yes, IF:
1. doing that is NOT inconsistent with settlor intent; OR
2. doing that is in best interest of beneficiaries

court can reform to reflect settlors intent if a mistake in terms is shown by CLEAR & CONVINCING EVIDENCE

63
Q

Can a trustee terminate trust?

A

Yes, IF:
1. property is less than $50k
2. amount insufficient to justify costs of administration
3. notice given to beneficiaries (consent NOT required)

64
Q

When does a trust automatically terminate?

A
  1. expiration of term in trust; OR
  2. when all purposes accomplished, become unlawful, contrary to public policy, or impossible to achieve
65
Q

What is a resulting trust?

A

Equitable reverstion that arises via operation of law

Types:
1. arising on failure of express trust (implied)
2. arising from an incomplete disposition of trust assets (implied)
3. purchase money resulting trusts

66
Q

What are typical circumstances where a resulting trust arises?

A
  1. trust is void or unenforceable
  2. beneficiary is dead or can’t be located
  3. failure of charitable trust where cy pres is inapplicable
67
Q

What is a constructive trust?

A

Equitable remedy to prevent UNJUST ENRICHMENT resulting from wrongful conduct (fraud/misrepresentation)

-
Trustees only duty is to convey property to person who would have owned it but for wrongful conduct

68
Q

What is the power of appointment?

A

Authority created in a person (donee) to designate the persons who will take certain property & the manner in which they will take

must designate w/in limits prescribed by creator of power (donor)

69
Q

Explain the general & special powers of appointment

A

1 - General
- one exerciseable in favor of the donee herself, her estate, her creditors, or creditors of her estate

2 - Special
- one exerciseable in favor of a specified class of persons that does not include those in “general”

70
Q

When does a general residuary clause in a will exercise testamentary power of appointment?

A
  1. when specific reference is made to power; OR
  2. some indication of intent to include the property subject to power
71
Q

When can a charitable trust have ascertainable beneficiaries?

A

When the beneficiary is a specified charitable agency

72
Q

Do general references to bank accounts in a will revoke a Totten Trust?

A

NO!

Florida Bar Subjects (11 decks)

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