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Wills & Trusts - STCL Esteban > Jenkins 2018 Trusts > Flashcards

Jenkins 2018 Trusts Flashcards

1
Q

What are inter vivos trusts?

A

A trust created during a person’s life to hold assets for a beneficiary until his death.

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2
Q

What is a trust?

A

A fiduciary relationship in which one or more persons hold title to property subject to the obligation to use it for the benefit of afrtherther.

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3
Q

Who is a trustee?

A

The person who holds legal title to the property in the trust and manages the trust for the benefit of the beneficiary..

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4
Q

What are the principle reasons for creating a trust?

A

1 protect assets of a beneficiary who can’t manage them (minor, incapacitated)
2 remedy for people who hold title to property unjustly

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5
Q

Who is a settlor?

A

The person who creates a trust.

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6
Q

Who may create a trust?

A

1 owner of property who doesn’t suffer disability

2 agent can create trust for someone suffering from disability

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7
Q

What is the corpus of the trust?

A

The property held in the trust.

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8
Q

Who may be the trustee?

A

Any person or entity that is capable of holding title to property.

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9
Q

May an unincorporated association be a trustee?

A

Not traditionally, but some jurisdictions allow it if the unincorporated association has the ability to own property.

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10
Q

Who is the beneficiary of a trust?

A

The person who benefits from the trust.

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11
Q

Can the sole trustee be the sole beneficiary?

A

No, because the same person can’t have legal title and equitable title to the corpus.

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12
Q

Who administers a trust?

A

The trustee.

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13
Q

what are the terms oft he trust?

A

The terms that define the trustee’s duties and the beneficiary’s rights.

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14
Q

What are the 3 classes of trusts?

A

1 according to settlor’s intent
2 according to settlor’s duties
3 according to the way trust is created

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15
Q

What are the 3 types of trusts that fall into the intent class of trusts?

A

1 express trusts
2 resulting trusts
3 constructive trusts

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16
Q

What are the 2 types of express trusts?

A

1 private trusts

2 charitable trusts

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17
Q

What are the 2 types of trusts that fall into the duties class of trusts?

A

1 active trusts

2 passive trusts

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18
Q

What is the difference between a trust and a bailment?

A

1 In a trust the trustee has title, in a bailment bailee only has possession.
2 a trust can cover personal and real property, a bailment is only for personal property
3 trustee has a fiduciary duty, a baliee does not
4 trusts have equitable remedies, bailments have legal remedies

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19
Q

How do you distinguish a trust from a executorship or administratorship?

A

1 administrator and executor do not hold title to realty
2 administrator and executor have limited duties
3 trustee has duty to invest
4 trustee don’t require court supervision

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20
Q

How does a guardianship differ from a trust?

A

1 guardian does not hold title
2 guardian has fixed duties
3 guardian’s role is limited to the term of incapacity

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21
Q

What is the difference between agency and a trust?

A

1 principal controls agent, beneficiary does not control trustee
2 agent doesn’t hold title
3 agent has person liability, a trustee does not

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22
Q

What is the difference between a third party beneficiary contract and a trust?

A

1 contract obligor does not have a fiduciary duty
2 third party beneficiaries do not have equitable interest
3 third party beneficiaries can enforce their rights at law, trust beneficiaries can enforce their rights in equity

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23
Q

What is the difference between an equitable charge and a trust?

A

1 equitable charge has no fiduciary relationship
2 transferee of equitable charge has both legal and equity title
3 transferee of equitable charge owns the property when he pays off the equitable charge.

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24
Q

What are the 4 elements of a private express trust?

A

1 intent to create
2 subject matter - corpus
3 a trustee
4 a beneficiary

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25
Q

What are precatory words?

A

Words of intent to create a trust - hope, wish, desire or recommendation

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26
Q

What is an illusory trust?

A

When person creates a trust properly but maintains so much control over the property that it’s clear he didn’t intend to relinquish control of the property.

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27
Q

What are the requirements for the corpus of a trust?

A

The property exists throughout the life of the trust. There is an exception when there is an expectation of future income.

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28
Q

What is the corpus for an insurance trust?

A

proceeds from a life insurance policy.

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29
Q

What happens if a person who intends to create a trust fails to name a trustee?

A

The court will appoint one.

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30
Q

How can the trustee’s function be terminated?

A

1 death
2 resignation
3 judicial removal

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31
Q

Can a beneficiary be trustee if there are multiple beneficiaries?

A

Yes, no merger of interests occurs.

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32
Q

Can there be multiple trustees and a sole beneficiary?

A

yes, one of the trustee may also be the sole beneficiary.

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33
Q

Can there be multiple trustees and multiple beneficiaries?

A

yes, and all beneficiaries can be trustees.

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34
Q

Who can be a beneficiary?

A

any person or entity

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35
Q

Can aliens be beneficiaries of trusts?

A

yes, although some property may be subject to forfeiture in some jurisdictions.

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36
Q

Can corporations be trust beneficiaries?

A

yes, if it has the ability to hold legal title to property.

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37
Q

Can the settlor of a trust be its beneficiary?

A

Yes, unless he’s the sole trustee.

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38
Q

Under what circumstances may a class of people be the beneficiary of a trust?

A

if the class is definite and ascertainable

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39
Q

What happens if the settlor gives the trustee the unlimited right to choose the beneficiary of the trust?

A

no trust is created and trustee gets property as a gift.

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40
Q

Can an unborn child be a beneficiary of a trust?

A

yes, if it is part of a class

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41
Q

What is the doctrine of worthier title?

A

When a settlor transfers property to the trust and the trust holds it for the benefit of settlor’s life then to the settlor’s heirs.

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42
Q

What is an honorary trust?

A

When the trust is for a non-charitable purpose but no ascertainable beneficiary is designated.

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43
Q

Can a beneficiary transfer his interest in a private express trust?

A

Only if there are no restrictions on transferability in the trust.

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44
Q

What are the three most common devices for restricting the beneficiary’s right o alienate his interest in the trust?

A

1 spendthrift trusts
2 forfeiture provisions
3 discretionary trusts

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45
Q

Can restraints be imposed on the beneficiary’s right to alienate his interest in the trust with respect to funds that have been paid to him from the trust?

A

no, protections against alienation can only be imposed when the funds are still in the trustee’s control.

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46
Q

What is a spendthrift trust?

A

an express provision against the transfer of a beneficiary’s right to receive principal, income or both. they are valid in most states.

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47
Q

Can a settlor stop creditors from getting at a beneficiary’s interest in a spendthrift trust without barring voluntary transfer of the trust interest as well?

A

Generally not. Courts will interpret a bar against one kind of alienation as a bar against both alienations (voluntary or involuntary).

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48
Q

May a settlor create a spendthrift trust in himself?

A

No, it would unjustly shield the assets from creditors if he could.

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49
Q

Are creditors and other claimants completely barred from reaching the beneficiary’s interest in the trust to satisfy their claims?

A

No, most statutes provide for creditors with the ability to get some parts of the spendthrift interest.

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50
Q

What is a discretionary trust with support provisions?

A

Trust that allows trustee to pay only the amount of principal or interest needed to educate and support the beneficiary. Additional amounts are transferred by the beneficiary.

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51
Q

Can a settlor create a discretionary support trust with himself as the beneficiary?

A

Yes, but it has limited protection with creditors because they can still reach some funds.

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52
Q

What is a discretionary trust?

A

A trust that limits the beneficiary by giving the trustee the ability to determine what the beneficiary gets in income and principal.

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53
Q

What is a forfeiture provision?

A

Provision that terminates a beneficiary’s interest if he assigns his interest, if creditors try to reach his interest or if he declares bankruptcy.

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54
Q

What is a charitable trust?

A

Trust devoted to a charitable purpose that benefits a definite class, even if the class is indefinite.

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55
Q

What are the 6 elements of a charitable trust?

A 
1 settlor with intent to create trust
2 trustee to administer trust
3 a res or trust property
4 charitable purpose or aim
5 definable class to be benefitted
6 usually indefinite beneficiaries
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56
Q

How does a charitable trust differ from a private trust?

A

1 charitable trust has indefinite beneficiaries
2 charitable trust has a charitable purpose
3 charitable trust have unlimited duration

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57
Q

What is a charitable purpose?

A

Manifested intent of settlor to benefit, improve, or uplift mankind mentally, morally, physically, or spiritually?

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58
Q

What does it mean for the class of beneficiaries to be definite?

A

Must be large enough to effect the community in general but not large enough to effect all mankind.

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59
Q

What happens if you try to set up a trust for both charitable and noncharitable purposes?

A

1 if they can’t be separate it is void
2 if they are dividable the charity party will be treated as a charitable trust
3 the entire trust can be sustained as a charitable trust by disregarding the non-charitable purposes.

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60
Q

Who enforces charitable trusts?

A

Usually, the state’s attorney general.

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61
Q

What is the doctrine of deviation?

A

It allows trustee to deviate from a term of a charitable trust under two circumstances:
1 compliance is impossible
2 purposes can’t be fulfilled

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62
Q

What is the doctrine of cy-pres?

A

it takes care of situations where settlor’s charitable purpose for charitable trust fails.

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63
Q

What circumstances justify cy-pres?

A 
1 trust property insufficient
2 purpose already accomplished
3 purpose requires 3rd party consent and it's not forthcoming
4 purpose is useless
5 purpose illegal
6 beneficiary is corporation that can't be beneficiary
7 site is impracticable
8 purpose impracticable
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64
Q

Does the court need settlor’s consent to use cy-pres?

A

No, court can use cy-pres.

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65
Q

What is a resulting trust?

A

an equitable reversionary interest - when a person transfers property but does not really intend for the transferee to have a beneficial interest in the property.

66
Q

What are the 3 ways a resulting trust can rise?

A

1 when an express trust fails
2 when an express trust doesn’t use all the property
3 when a person buys a property in another person’s name.

67
Q

What are the elements of a resulting trust?

A

1 an unrebutted inferred intent to create a trust
2 a trustee
3 a trust property
4 a beneficiary

68
Q

What are the trustee’s duties under a resulting trust?

A

To transfer legal title of property to the settlor or the residuary of settlor’s estate.

69
Q

Must a resulting trust be created in writing?

A

no, intent is inferred from the circumstances

70
Q

What is a purchase money resulting trust?

A

A situation where property is conveyed to one person and paid for by another person.

71
Q

What kinds of things show contrary intent?

A

1 making of loan to titleholder or someone else
2 discharge of debt to titleholder or 3rd party
3 a gift to the titleholder

72
Q

What is a constructive trust?

A

A remedy by courts to get title from one person and give it to the person who should have it.

73
Q

What distinguishes a constructive trust from other trusts?

A

Intent, settlor doesn’t want to create trust.

74
Q

How are constructive trusts created?

A

Courts create them as a remedy.

75
Q

What are the trustee’s duties in a constructive trust?

A

Convey wrongfully obtained property to its rightful owner.

76
Q

Example situations of when a court will create a constructive trust.

A 
person obtains property by:
1 fraud, duress, mistake, or undue influence
2 murder
3 wrongfully taking property
4 oral promise
5 inheritance by oral promise
6 breach of fiduciary duty
77
Q

Can a court force a thief to be a constructive trustee of the property he stole?

A

No, a thief never has title to the property he stole.

78
Q

What are the six principal ways to create a trust?

A 
1 declaration of trust
2 inter vivos trust
3 testamentary trust
4 exercise of power of appointment
5 contractual agreement
6 by statute
79
Q

What is a declaration of trust?

A

when a person declares himself to be holding property in trust for someone else.

80
Q

What is an inter vivos trust?

A

Manifestation of intent to transfer into a trust while settlor is still alive.

81
Q

What is a testamentary trust?

A

Trust created in a will.

82
Q

What is a power of appointment?

A

The authority given by the owner of the property to someone so they can transfer the property to another.

83
Q

Does consideration have to change hands to create a valid trust?

A

no, most trusts are gratuitous.

84
Q

Must a beneficiary have notice of the existence of the trust fort he trust to be valid?

A

No, knowledge and acceptance no required.

85
Q

How does the parol evidence rule affect the creation of trusts?

A

It determines if extrinsic evidence is available to show what the owner’s intent was concerning the creating a trust.

86
Q

Must a trust be in writing to be valid?

A

Only if it contains real property, it doesn’t have to be in writing if it only has personal property.

87
Q

What are common illegal purposes that cause a trust to fail?

A

1 encouraging crime or tort by trustee
2 enforcement against public policy
3 defraud creditors or 3rd parties
4 consideration is illegal

88
Q

Does a settlor have the power to revoke or modify the trust?

A

No, unless the settlor expressly reserves the right to in the trust documents.

89
Q

Under what circumstances will a trust terminate?

A

1 created for a limited time
2 created to end when condition occurs
3 purpose impossible or illegal
4 continuance defeats purpose
5 settlor is sole beneficiary and wants it to end
6 trustee transfers interest to beneficiary
7 settlor and beneficiaries agree to terminate

90
Q

Is the consent of the beneficiaries alone sufficient to terminate a trust?

A

No, generally more is required (action by trustee, purpose, etc)

91
Q

Must a trustee expressly accept the trusteeship?

A

No, implied acceptance is possible.

92
Q

What are the trustee’s powers as trustee?

A

1 express powers - given in trust instrument

2 implied powers - necessary to accomplish purpose

93
Q

Is a trustee entitled to payment for acting as trustee?

A

yes, it can be set in trust document, can be set by court, or can be set by statute.

94
Q

What are the principal duties of trustee?

A 
1 take possession and administer trust
2 loyalty to beneficiary
3 preserve the trust property
4 disclose facts and legal rights to beneficiary (inform)
5 not delegate duties
6 keep accounts
7 not commingle property
8 invest trust property productively
9 distribute income and principal per trust
95
Q

If there’s more than one trustee, can one of the trustees exercise the trust powers unilaterally?

A

No, it must be joint action unless specified in instrument.

96
Q

What is the duty to take possession of the trust property?

A

1 act without delay to take possession of property
2 use reasonable means to get property from 3rd parties
3 take reasonable means to enforce claims

97
Q

What does the trustee’s duty of loyalty consist of?

A

1 can’t sell trust property to himself
2 cant buy trust property for himself
3 can’t buy property for himself that he should buy for trust
4 can’t use trust property for his uses
5 can’t compete with beneficiary
6 can’t disclose confidential information

98
Q

What is the duty to keep and render accounts?

A

Duty to keep accurate accounts for trust. can’t be contracted around.

99
Q

What is the prudent person rule the trustee must follow?

A

Trustee must exercise discretion of men of prudence discretion and intelligence when managing affairs of trust.

100
Q

Under what circumstances is the trustee personally liable on contracts he makes in administering the trust?

A

Trustee is always liable.

101
Q

Under what circumstances is the trustee personally liable for torts committed as a result of administering trust?

A

To the extent he would be liable for if there was no trust.

102
Q

What are the 4 types of relief a beneficiary may seek against a trustee?

A

1 compel to perform duties
2 enjoin breach of trust
3 compel to redress breach of trust
4 ask court to appoint a receiver

103
Q

Are exculpatory clauses construed broadly or narrowly?

A

very narrowly

104
Q

Under what circumstances is the trustee liable for contracts he makes while administering the trust?

A

Liable unless other party agrees to only seek compensation from trust property.

105
Q

When can a trustee seek indemnification from the trust assets, if he is held personally liable in tort?

A

Only when trustee himself is not personally at fault.

106
Q

When will one trustee be liable for the other trustee’s breaches of the trust?

A

If trustee participates in breach or fails to exercise diligence.

107
Q

Can trustee net out profits against losses to avoid liability for imprudent investments?

A

no, trustee liable for imprudent investments.

108
Q

Is a trustee allowed to make a profit from the trust if he doesn’t commit a breach of trust?

A

No, trustee cannot profit from trust.

109
Q

What are appreciation damages?

A

When trustee holds on to the property too long or there is a serious conflict of interest.

110
Q

When a trustee breaches any duty to the beneficiary, are damages the beneficiary’s only remedy?

A 
No, may also seek:
1 specific performance
2 injunction
3 objections to trustee's accounts
4 appointment of receiver
5 waive trustee compensation
111
Q

When a trustee breaches a duty to the trust, may the settlor sue him?

A

No, unless settlor retained an interest.

112
Q

Can a settlor protect a trustee from liability for breach of trust in the trust document itself?

A

Not very effectively.

113
Q

How do you contribute to a trust?

A

Transfer property to a trustee, create life insurance policy payable to trust or by devise in a will as long as there is a written trust agreement.

114
Q

What is equitable title?

A

an entitlement to the proceeds and benefits of the trust while not having title until distribution of corpus.

115
Q

What is the annual limit for gifts to minors?

A

$14k per year can be put into a trust for a minor.

116
Q

What is bifurcation of ownership?

A

A doctrine where the trustee holds legal title to trust property but the beneficiaries hold equitable title or beneficial ownership of trust property.

117
Q

What are the functions of a trusteeship?

A
  1. custodial
  2. administrative
  3. investment
  4. distribution
118
Q

What is the difference between a trust and life estate?

A

Tenant has title but no right to sell, also restricted from waste and destroying property.
beneficiary has equitable interest but no title, trustee controls assets and holds title.

119
Q

What are the requirements to create a trust?

A
  1. intent
  2. ascertainable beneficiaries
  3. specific property
  4. settlor
  5. trustee
120
Q

Will a trust fail if there is no trustee?

A

A trust will not fail for want of a trustee, the court will appoint one.

121
Q

Can trustee use trust assets for outside the scope of the trust?

A

No, assets of the trust must be used for their intended purpose and trustee will be required to reimburse the trust for misappropriation of funds.

122
Q

What is acceptance of trusteeship?

A

Doctrine that requires the trustee to accept trusteeship. The burden is so great that the courts won’t impose the duty on anyone and trustees are required to accept position voluntarily.

123
Q

What is a symbolic deliver?

A

a symbolic gesture indicating delivery - keys to a house or car, packing slip

124
Q

What is an ascertainable beneficiary?

A

A beneficiary that is named in the trust and has the ability to demand fiduciary duties from trustee. For class gifts, they are ascertained at the time of death and not the time the trust is created.

125
Q

Can a trust be created verbally?

A

yes, it can be created verbally but the court will require clear and convincing evidence of the trust’s existence. They cannot govern land transfers due to statue of frauds.

126
Q

what are term life and whole life policies?

A

Term - you pay for a specific time, you are covered and it pays out
Whole life - you pay for a certain amount of time and the coverage is permanent, it pays out.

127
Q

What is a conservatorship?

A

When the court appoints someone to manage the funds of an incapacitated person.

128
Q

What is the difference between a durable and general power of attorney?

A

A general POA expires when the person become incapacitated.

A durable POA does not expire when the person becomes incapacitated.

129
Q

What is the purpose of a guardianship?

A

to protect the well-being of the incapacitated purpose.

130
Q

What is a guardianship?

A

When the court appoints a person authority over a person due to their mental or physical limitations.

131
Q

In the absence of a medical power of attorney who can make medical decisions for a person?

A
  1. spouse
  2. adult child
  3. parent
  4. adult sibling
132
Q

What is the concept of substituted judgment?

A

When the agent will make a decision based on what he patient would have chosen instead of his own preferences.

133
Q

What is the non further inquiry rule?

A

when a trustee’s personal interests conflicts with the trust he cannot act, there is no further inquiry.

134
Q

What are the remedies for trustee’s bread of duty of loyalty?

A
  1. compensatory damages to reimburse trust
  2. disgorge trustee of profits even if they exceed assets of trust
  3. disgorge third party of profits
135
Q

Exception that allows trustee to continue in spite of a personal interest in transaction.

A
  1. settlor approves transaction
  2. beneficiaries consent and have full disclosure
  3. judicial approval is given in advance
136
Q

Is it harder to make mandatory or discretionary distributions?

A

Discretionary are hard and cause more problems because there can be disagreements between the trustee and beneficiary regarding distributions.
Mandatory distributions are easy because the amount is set and not subject to negotiation and interpretation.

137
Q

What is a mandatory distribution?

A

when a trust specifies that certain distributions must be made.

138
Q

what is discretionary distribution?

A

when a trust gives the trustee the ability to determine the amount and timing of distributions. Trustee has a fiduciary obligation to the beneficiary and can’t intentionally withhold funds.

139
Q

What is the duty to diversify?

A

duty to use different investments to balance the risk of investments.

140
Q

What is the duty to delegate?

A

The duty to delegate certain projects to people with the competent skills in those types of projects.

141
Q

What is a contingent trust?

A

A trust that requires a certain condition be met before it is effective. Generally used to restrict age when a beneficiary gets corpus distributions.

142
Q

What are some custodial and administrative functions of a trustee?

A
  1. duty to collect and protect trust property without delay
  2. duty to earmark trust property
  3. duty not to mingle trust funds with trustee’s funds
  4. duty to keep adequate records of administration
  5. duty to bring and defend claims
143
Q

What is the duty of impartiality?

A

when there are 2 or more beneficiaries, trustee shall be impartial in investing, managing, and distributing trust property, giving due regard to beneficiaries’ respective interests.

144
Q

What is trustee’s duty with regard to providing information to beneficiaries?

A

Trustee must respond to all reasonable requests for information within a reasonable time period.

145
Q

Does the duty to inform trump the power of sale?

A

Yes, trustee can sale property but he must inform beneficiaries ahead of time and get consent.

146
Q

What is a purely discretionary trust?

A

trust where trustee has absolute discretion over distributions to beneficiaries.

147
Q

What is a support trust?

A

trust where trustee is required to make distributions based on beneficiary’s needs.

148
Q

What are the exceptions to a spendthrift provision?

A

child support or maintenance, creditor who protected trust interest, state action, federal action,

149
Q

What is a defense to civil contempt charges?

A

impossibility of performance

150
Q

What is required to modify or terminate a trust?

A
  1. consent of all beneficiaries
  2. consent of settlor
  3. can’t be contrary to settlor’s purpose
151
Q

What is the equitable deviation doctrine?

A

Doctrine that requires petitioner to show change in circumstances has or will defeat the accomplishment of the purpose of the trust. Court will permit trustee to deviate from administrative terms of trust.

152
Q

What is decanting?

A

when a trustee distributes property to a trust with revised terms.

153
Q

When can a court remove a trustee?

A
  1. serious breach
  2. lack of cooperation between co-trustees
  3. unfitness or failure to administer trust effectively
  4. change in circumstances and a suitable replacement is available
154
Q

When there are 2 or more trustees how many are required to take action?

A

A majority of trustees must approve actions.

155
Q

What happens when a trust fails?

A

A resulting trust gives it to the settlor or the residue of settlor’s estate.

156
Q

What is a charitable trust?

A

A trust that has a charitable purpose, is exempt from the rule against perpetuities, and does not require an ascertainable beneficiary. It can’t be mixed with a private trust.

157
Q

What is cy pres?

A

when the purpose is no longer reasonable to meet and the court changes the purpose to a similar, related purpose.

158
Q

What is administrative deviation?

A

When the purpose is still valid but the administration of the trust must be changed to meet the purpose.

159
Q

Who enforces the rights of a charitable trust?

A

The attorney general or a beneficiary of the trust.

160
Q

What are common charitable purposes?

A

scientific, education, environmental, promotion of health, government or municipal purpose, other benefit to the community.

161
Q

What makes a charitable trust wasteful?

A

When the assets in the trust far exceed the amount need for the charitable purpose.

Wills & Trusts - STCL Esteban (4 decks)

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