Modification of Trusts

Question 1

Who may modify a trust?

Answer 1

Either the settlor or the beneficiary

Question 2

What is the material purpose doctrine? When does it apply?

Answer 2

The general rule that a modification may not impair a material purpose of the trust

Only applies when the settlor is deceased

Question 3

Who must consent to a modification of an irrevocable trust?

Answer 3

Current and future beneficiaries

Question 4

How can a settlor revoke a revocable trust?

Answer 4

By substantially complying with the trust provisions concerning revocation

Question 5

Can will substitutes be revoked by will?

Answer 5

No, unless it is a revocable trust

Question 6

How may a settlor revoke a revocable trust by will?

Answer 6

Either:
(1) specifically referring to the trust in the will
(2) Bequeathing property that had been placed in the trust

Question 7

When may an agent exercise the principal’s power to revoke if the principal lacks capacity?

Answer 7

Only if the trust or the power of attorney expressly authorizes the agent to do so

Question 8

When may a settlor revoke an irrevocable trust?

Answer 8

Only when all current and future beneficiaries consent

Question 9

Under what circumstances may a trust be modified after the settlor’s death?

Answer 9

(1) Modification does not impair a material purpose and all beneficiaries consent;
(2) A change in circumstances has occurred; or
(3) If a charitable trust, either a purpose restriction becomes illegal, impossible, or impracticable (cy pres), or an administrative restriction impairs the settlor’s intended purpose

Question 10

When is representation required for a modification?

Answer 10

When a beneficiary is a minor, unborn or unascertained, or cannot be located

Question 11

Under the UTC, who can represent a minor or unborn child?

Answer 11

A parent

Question 12

Under the UTC, who can represent a protected person?

Answer 12

A conservator or guardian

Question 13

Under the UTC, may a person with a substantially identical interest represent a beneficiary with respect to that interest?

Answer 13

Yes

Question 14

Under the UTC, may a court appoint a representative for a beneficiary?

Answer 14

Yes

Question 15

What are the methods of trust termination?

Answer 15

(1) By the terms of the trust
(2) Completion of the trust’s purpose
(3) Complete distribution of the trust’s assets
(4) Modification that results in termination
(5) Merger

Question 16

What is merger with respect for trust?

Answer 16

When the same person owns the legal and equitable interests of a trust

Question 17

What are the two categories of trustee responsibility?

Answer 17

(1) Managing and investing the trust property
(2) Making distributions

Question 18

What fiduciary duties do trustees owe?

Answer 18

(1) Duty of obedience
(2) Duty of loyalty
(3) Duty of care
(4) Duty to be a prudent investor
(5) Duty of impartiality
(6) Duty to inform and report

Question 19

What is the duty of obedience?

Answer 19

Trustee must follow settlor’s instructions

Question 20

What is the duty of loyalty?

Answer 20

Trustee must act in sole interest of the beneficiaries

Question 21

What remedies are available for a breach of trust?

Answer 21

(1) Compel the trustee to carry out duties
(2) Enjoin the trustee from committing the breach
(3) Require the trustee to fix the breach
(4) Require the trustee to prepare an accounting of receipts and disbursements
(5) Reduce or deny the trustee’s compensation
(6) Demand the trustee pay damages
(7) Remove the trustee