Intro

Question 1

What Is a Trust?

Answer 1

A type of transfer that severs legal and equitable title. A fiduciary relationship where one party (the trustee) holds legal title to property for the benefit of another (the beneficiary) who holds equitable title.

Question 2

Types of Trusts

Answer 2

Include:

• Express Trusts- created intentionally (include private trusts and charitable trusts)
• Implied Trusts- created by operation of law (include constructive trusts and resulting trusts). Are equitable remedies provided by a court.

Question 3

Express Trusts: Private Trust

Answer 3

Created to benefit private, non-charitable beneficiaries

Question 4

Express Trusts: Charitable Trusts

Answer 4

Created for some charitable purpose or to benefit qualified charitable beneficiaries rather than individuals or some private beneficiary class.

Question 5

Implied Trust: Constructive Trusts

Answer 5

Imposed to deprive a wrongdoer from retaining improperly obtained property.

Question 6

Implied Trusts: Resulting Trusts

Answer 6

Imposed irrespective of wrongdoing when the circumstances require it. Most often arises when a settler transfers full legal title but fails to transfer full equitable title (e.g. when a settler maintains a reversionary interest).

Question 7

Parties to a Trust

Answer 7

Include:

• Settlor- sets up the trust
• Trustee- receives legal title to the trust property/trust fund
• Beneficiary- receives equitable title to the trust property/trust fund and uses and enjoys the property of the trust

Question 8

Parties to a Trust: Who Can Be Who?

Answer 8

More than one party can fit each role and each party can fit more than one role. But a sole trustee cannot also be the sole beneficiary.

Question 9

Inter Vivos Trust

Answer 9

Created during settlor’s lifetime and usually as a gift.

Question 10

Illusory Trust

Answer 10

An arrangement that appears to be a trust but because of overwhelmingly broad powers retained by the settlor over the trust fund, it is not in fact a trust (if the whole thing is considered an illusory trust it will fall into residuary or intestacy)

Question 11

Testamentary Trust

Answer 11

Created in settlor’s will.

Question 12

Declaration of Trust

Answer 12

When a settlor names self as trustee, the trust is created by a declaration of trust.

Question 13

Can a Declaration of Trust be Oral?

Answer 13

Yes, unless:

• the trust assets include RP, in which case the trust must be writing under SOF; or
• the trust is testamentary in which case it must be in writing under the Statute of Wills

Question 14

Trustee Req.

Answer 14

A trust must have a trustee, but failure to designate or appoint a qualified trustee will not necessarily cause the trust to fail. Instead, the court will appoint one.

Question 15

Co-Trustees

Answer 15

• Where two or more persons have been named as co-trustees, they are ordinarily considered joint tenants with right of survivorship with regard to the legal title over the trust fund.
• However, the trust may override this and name a successor trustee to step in after the death of a trustee and serve instead of or along with a prior trustee.

Question 16

Disagreement Amongst Trustees

Answer 16

Co-trustees who are unable to reach a unanimous decision may act by majority decision. A co-trustee may formally dissent and protect self from liability down the road.

Question 17

Replacement of Trustees

Answer 17

A trustee may resign or be removed for cause. In such a case, the trust will not terminate; another trustee will be appointed.

Question 18

What Happens When a Trust Terminates?

Answer 18

When the trust does in fact terminate, the trustees transfer their interest (legal title) to the beneficiaries (who already hold equitable title). Trustee ownership and control over the trust fund then ends beyond that which is necessary to wind up the affairs of the trust.

Question 19

Failed Attempts to Create a Trust

Answer 19

If a sole trustee is also the sole beneficiary, the trust will collapse because the interests will merge into the same person.

Question 20

Principal/Trust Corpus

Answer 20

The amount originally received, plus capital gains and less debts, expenses, and capital losses.

Question 21

Income

Answer 21

The interest, receipts, dividends, and other income earned by the principal.