FL Trusts

Question 1

What are the (7) elements of a PRIVATE EXPRESS trust?

Answer 1

“Settlors Capacity, Present Intent, Property, Trustee, Benefit, Definite, Ascertainable, Valid Purpose”
SC
PI
PT
B
DA
VP

A private express trust is created when:

(i) a settlor,
(ii) who has capacity to create a trust,
(iii) clearly expresses a PRESENT INTENT to transfer ownership of;
(iv) PROPERTY to;
(v) a TRUSTEE who has duties to perform;
(vi) for the BENEFIT of one or more DEFINITE or ASCERTAINABLE beneficiaries;
(vii) for a VALID purpose

Question 2

In Florida, when can an expression of intent to create a future trust be sufficient to create a trust in the future?

Answer 2

IF the transferor received consideration, then the intent may be sufficient to result in the future creation of a trust despite the lack of intent at that time

Question 3

When will a trust automatically terminate?

Answer 3

“ER PP”

A trust will automatically terminate to the extent that the trust
1) EXPIRES,
2) is REVOKED
3) is PROPERLY DISTRIBUTED pursuant to the trust’s terms
OR
4) when all of the trust PURPOSES are accomplished

Question 4

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

Answer 4

No, because that would result in a lack of enforcement power by the beneficiary against the trustee

If the sole trustee is the sole beneficiary, then title merges and the trust TERMINATES

Question 5

What is a spendthrift provision?

Answer 5

used in a trust to prevent BENEFICIARY from THWARTING the purpose of the trust and gaining IMMEDIATE access to funds that cannot be distributed under the trust terms

Beneficiary is PREVENTED from TRANSFERRING her interest
and
her creditors are NOT able to attach that interest

Question 6

Statute of Limitations for a Breach of Trust claim?

Answer 6

4 years;
unless Trust Beneficiary receives disclosure document that adequately discloses matter and a limitation notice –> then SOL is 6 months

Question 7

If a trust operates only _____________or ______________to benefit a person, the person will not be a beneficiary and will not be able to enforce rights under the trust

Answer 7

Incidentally; Indirectly

Question 8

True or False:
In Florida, a passive trust is a valid express trust

Answer 8

False

Trustee must be given SPECIFIC DUTIES

Passive Trust (trust where Trustee’s only duty is to pass property to a beneficiary) is NOT a valid express trust

Question 9

When does a revocation of a trust become effective?

Answer 9

When the act manifesting the intent to revoke OCCURS,

NOT when the trustee or beneficiaries learn of the act

Question 10

Is a trust presumed to be revocable or irrevocable?

Answer 10

Revocable

(Unless terms of the trust state otherwise)

Question 11

What is FL’s RAP rule for non-vested property interests in trusts?

Answer 11

These interest are invalid unless

(1) 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

*Interests created from Jan. 1, 2001 - June 30, 2022 interest must vest within 360 years
Interests created on or before December 31, 2000, the vesting period is 90 years

Question 12

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 12

Those provisions are void

unless the trust instrument or the court’s judgment for divorce expressly provides otherwise

Any such trust must be administered and construed as if the ex-spouse had died on the date of the divorce

Question 13

Is Consideration is required to create an express trust?

Answer 13

No

Question 14

What is the anti-lapse rule in Florida?

Answer 14

if a QUALIFYING beneficiary of a FUTURE INTEREST under the trust’s terms fails to survive the distribution date,
+ the deceased beneficiary leaves surviving descendants,
–> then a substitute gift is created in the beneficiary’s surviving descendants

If no surviving descendants –> the interest lapses

(Unless the trust states otherwise)

Question 15

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 15

No;

when 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’s made

This restriction applies to ANY beneficiary creditor

Question 16

Where does a trustee’s authority derive from?

Answer 16

The trust instrument, and (except as limited by trust’s terms)

By statute all powers over trust property that an unmarried competent owner has over individually owned property + any other powers appropriate to achieve the proper investment, management, and distribution of the trust property

Question 17

Are charitable trusts subject to the Rule Against Perpetuities?

Answer 17

No; they continue indefinitely

Question 18

What trust provisions show that the trust has a material purpose?

Answer 18

If it has
– a spendthrift provision,
– a discretionary distribution provision,
– a distribution provision keyed to the support of the beneficiary, or
– a postponement of enjoyment provision

Question 19

What is the “no further inquiry” rule under the duty of loyalty?

Answer 19

A trustee owes a duty of loyalty to the beneficiaries, and
self dealing is PROHIBITED

Once self-dealing is established, NO further inquiry into the trustee’s reasonableness or good faith is needed, because self-dealing is a PER SE BREACH of the duty of loyalty

Question 20

A qualified beneficiary is entitled to a trust accounting.

To be qualified, the person must be a

Answer 20

– 1) LIVING BENEFICIARY WHO;
– 2) is CURRENTLY ELIGIBLE to RECEIVE A DISTRIBUTION of trust income or principal

Question 21

INHERITING SPOUSE’S ESTATE / BIGAMOUS MARRIAGE / BIGAM Y

In FL, a subsequent BIGAMOUS MARRIAGE to another (i.e. you marry someone when you’re already married to somebody else), the surviving spouse committing bigamy will be

Answer 21

estopped from taking an intestate share of the FIRST spouse’s estate

Question 22

A trustee owes a duty to the trust beneficiaries to administer the trustee in good faith, according to the trust’s terms and purposes.

A trustee who violates this duty has committed a breach of duty and is liable for the greater of:

Answer 22

• the amount required to restore the value of the trust property and trust distributions to what it would have been if the breach had not occurred, including lost income, capital gain, or appreciation that would have resulted from proper administration or
• the profit that the trustee made by reason of the breach.

Question 23

A spendthrift clause expressly restricts the beneficiary’s power to transfer his/her trust interest.

If a spendthrift clause exists, most of the beneficiary’s creditors are prevented from attaching the interest or demanding a distribution from the trustee.

But a spendthrift clause does not preclude claims by certain “exception creditors,” including:

Answer 23

• support claims by Beneficiary’s SPOUSE, EX-SPOUSE, or CHILD of a beneficiary;
• claims by a judgment creditor who has provided SERVICES for PROTECTION of Beneficiary’s TRUST;

OR

• claims of the FED GOV’T or the STATE (FLORIDA);

*A court may order attachment of present and future distributions ONLY AS A LAST RESORT AFTER an INITIAL SHOWING that TRADITIONAL METHODS of ENFORCING CREDITOR’S CLAIM are INSUFFICIENT

So if the beneficiary has other assets… –> the claimant must first seek to satisfy the claim from those assets

Question 24

SPENDTHRIFT TRUST

A court may order attachment of present and future distributions for “exception creditors” ONLY AS A LAST RESORT AFTER

Answer 24

an INITIAL SHOWING that TRADITIONAL METHODS of ENFORCING CREDITOR’S CLAIM are INSUFFICIENT

So if the beneficiary has other assets… –> the claimant must first seek to satisfy the claim from those assets

Question 25

Is a provision in a trust that would penalize a beneficiary for contesting the trust or instituting any actions relating to the trust assets enforceable?

Answer 25

No.

Question 26

If the value of a trust’s property is LESS THAN $50k, the trustee may terminate the trust WITHOUT court approval after NOTICE to the qualified beneficiaries, if

Answer 26

the trustee concludes that the trust property’s value is INSUFFICIENT to Justify the COST of ADMINISTRATION (No longer economic)

*If more than $50k, requires court approval

Question 27

If the value of a trust’s property is MORE THAN $50k, and trustee determines its purpose is no longer economical, (costs more to administrate the trust than the value of the trust) the trustee may terminate the trust but only with

Answer 27

COURT APPROVAL

Question 28

True or False:

A trust may not eliminate the trustee’s statutory duties to keep the qualified beneficiaries of the trust reasonably informed of the trust and its administration and to provide an annual trust accounting.

Answer 28

TRUE

Unlike many FTC provisions, which a settlor may override by contrary trust terms, the duty to inform and account cannot be eliminated by an explicit trust provision even if there is a justification for doing so

Question 29

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

Answer 29

“i TRUST you to describe property with REASONABLE CERTAINTY”

REASONABLE CERTAINTY