Kaplan Pgs 514-542

Question 1

What is a preferred claim with regard to a spendthrift trust?

Answer 1

Sometimes a creditor can petition the court to order that the trustee satisfy the creditor’s judgement of any payments that the beneficiary is entitled to, up to 25% of the payment that the beneficiary should get. As long as the amounts are not necessary for the support of the beneficiary

Question 2

What is one of the few things that creditors can reach a spendthrift trust for?

Answer 2

Necessary’s that were supplied to the beneficiary or his family, and sometimes if the court finds it equitable and reasonable, they can order that the trustee satisfy all or part of a restitution judgement to the victims of a felony committed by the beneficiary

Question 3

Can people create spendthrift trust for their own benefit in order to prevent creditors from reaching the refunds question

Answer 3

No not if it is to commit fraud on creditors. In California, this kind of trust is valid, but then the attempted restraint against transferees or creditors is invalid

Question 4

California’s anti-lapse provisions apply to both wills and what else?

Answer 4

Trusts

Question 5

In California, how are no contest clauses treated?

Answer 5

Their enforcement is prohibited if probable cause exists to challenge the validity of the trust or instrument

Question 6

How does an implied trust arise?

Answer 6

Not in the normal way. They usually come from operation of law or they are used by courts as a remedy for injustice

Question 7

What are the two types of implied trusts?

Answer 7

– resulting trusts

– constructive trusts

Question 8

What are typical situations when a resulting trust would arise?

Answer 8

• the trust has no beneficiaries (they died, they can’t be located, they disclaim their interests)
  – no provision was made for apportionment of the trust
  – trust was designated for a specific purpose is invalid, insufficient, or excessive
  – the trust purpose was never described or is unclear
  – carrying out the material purposes of the trust has become impractical

Question 9

What is the rationale behind a purchase money resulting trust?

Answer 9

The presumed intent that the person paying for the property should receive the beneficial use of it

Question 10

What is an exception to a purchase money resulting trust?

Answer 10

If the person paying the money has navigation to support the person whose name the title is taken in, there’s a presumption that a gift was made. Although this presumption can be rude but it was clear and convincing evidence

Question 11

Can parole evidence be admitted for a purchase money resulting trust in order to show proof about the intent of the nature of the transaction question

Answer 11

Yes

Question 12

What is the sole purpose of a constructive trust?

Answer 12

To require the holder of the property to divest himself of the benefit and transfer it to the person that is entitled to that asset. This is just a passive, temporary trust with the trustee’s sole duty being to transfer the title and position to the rightful owner of the property

Question 13

What are the common specific circumstances that give rise to a constructive trust question

Answer 13

That property was acquired as a result of fraud
– when the property was obtained in violation of a fiduciary relationship, such as an attorney and client, trustee and beneficiary, doctor and patient, employer and employee, accountant And client, or business partners
Dash the property was gotten by criminal means, such as by killing the owner

Question 14

What is the very important caveat for a constructive trust to be created?

Answer 14

There had to have been some intention for wrongdoing at the time of the conveyance to the person.

Question 15

What are the different ways that a trustee can get power?

Answer 15

• from the trust instrument
  – by statute
  – implied in law
  – granted by the court upon petition

Question 16

Generally a trustee’s actions regarding things that are within his discretion are not subject to attack unless what?

Answer 16

He has abused his discretion in undertaking the conduct

Question 17

If a trustee’s exercise of discretion has to be reviewed by a court, what is the standard that it is reviewed under?

Answer 17

An objective standard where he must act reasonably under the circumstances. And if he has sole or absolute discretion under the trust, his actions are reviewed under a good faith standard

Question 18

Once a trust terminated, how long does the trustee continue to have powers?

Answer 18

Until the affairs of the trust have been wound up

Question 19

California has adopted the Uniform Prudent Investor Act, and what does it say about trustees regarding guidelines and how they have to manage trust assets?

Answer 19

The trustee must invest and manage trust assets as a PRUDENT INVESTOR would considering the purposes, terms, and distribution while exercising reasonable care and caution. He must observe this role in managing all trust investments. His decisions regarding investments are then viewed in the context of the full trust portfolio and the overall investment strategy. Consider these factors:
– general economic conditions
– the effect of inflation or deflation
– tax consequences
– the role that each investment plays in the overall portfolio
– the expected total return
– other resources of the beneficiaries
– the need for liquidity or regular income as well as the preservation of capital
– the asset’s special relationship to one or more beneficiary

Question 20

California has adopted the uniform principal and income act which addresses how expenses and accretion should be approved between the income and principal beneficiaries of a trust. What are the basic provisions of this?

Answer 20

– The trustee should pay ordinary expenses out of income, and extraordinary expenses and those solely beneficial to the remainder interest out of principle
– if there are corporate securities in the trust: cash dividends are regarded as income and stock dividends are considered additions to the principal for the benefit of the remainder interest

Question 21

Can trustees delegate the performance of their duties to others question

Answer 21

Not unless permission is given in the trust instrument or the duties are delegated or purely administrative. If he employs agents or attorney needs to perform certain services he still is responsible for supervision of those agents

Question 22

If a trustee commits a breach of the trust, what are the three possible remedies for the trust?

Answer 22

– Resulting in loss or depreciation in value to the trust, with interest
– any profit made by the trustee with interest
– any profit that would have a crude to the trust if there wasn’t a break
– Punitive damages if the breach was intentional
– Constructive trust on anyone that was not a bona fide purchaser that got property from the trustee

Question 23

What are things that an exculpatory clause cannot relieve the trustee of liability for?

Answer 23

Dash acts committed intentionally, with gross negligence, in bad faith, or with reckless indifference to the interest of the beneficiaries
– profits gotten from a breach
–

Question 24

How are exculpatory clauses viewed with regard to trusts?

Answer 24

They are viewed with disfavour and narrowly construed

Question 25

Can trust beneficiaries freely assign their right to receive income or principal from the trust question

Answer 25

Yes and they don’t even have to give notice to the trustee

Question 26

If a trust beneficiary makes multiple assignments of his interest interest, how is it determined question

Answer 26

The first in time is the first in right

Question 27

If a trust beneficiary dies intestate, what happens to his trust interest?

Answer 27

It passes to his heirs

Question 28

If a co-beneficiary dies, what happens?

Answer 28

The terms of the trust control.

Question 29

If a trust was created where the income was payable to two or more beneficiaries, and the principal was only on the death of the last of the income beneficiaries, and one of the beneficiaries dies, what happens?

Answer 29

The survivor is entitled to the deceased beneficiaries portion until his death

Question 30

When does a trustee have the power to invade the principle of the trust question

Answer 30

If the income of the trust is insufficient but this will not happen if the invasion would impair the interest of other beneficiaries, such as remaindermen

Question 31

In California if community property is transferred into a revocable trust, what is it deemed question

Answer 31

It stays Community property

Question 32

If a seller doesn’t set forth a specific way that revocation has to happen, how can he revoke his trust?

Answer 32

In writing signed by him and delivered to the trustee

Question 33

At what point does a revocation of a trust occur?

Answer 33

When the settlor indicates an intent to revoke, not when the trustee learns of the revocation

Question 34

If a settler wants to modify a trust, he can do this to what extent?

Answer 34

Dash to the extent allowed by the terms of the trust, or
– with the consent of all of the beneficiaries
That if the trust is revocable it can only be modified with court approval and the consent of all beneficiaries

Question 35

What is a passive trust and what does it mean?

Answer 35

This is when the trustee has no duty or purpose other than just holding the title to the property subject to the use by the beneficiary. These trust terminate automatically entitled best in the beneficiary

Question 36

With regard to special powers of a power of appointment, what is the difference between the exclusive power and non-exclusive power?

Answer 36

• exclusive power: the person that has the power of appointment can distribute the subject matter to any of the designated objects
  – non-exclusive power: the donee must distribute at least part of the subject matter to each object. He determines the amount that each object gets, but he cannot refuse to distribute some of the property to each object

Question 37

What is the rule against perpetuities in California?

Answer 37

• regular RAP rule, or

– the must interest either vests or terminate within 90 years after its creation

Question 38

What is the rule against accumulations?

Answer 38

A private trust can accumulate income only for the period of the rule against perpetuities