Non-Probate transfers

Question 1

5 most common non-probate transfers

Answer 1

1. Inter vivos trusts
2. Life insurance
3. Joint tenancies and tenancies by the entirety
4. Payable-on-death and transfer-on-death accounts and contracts
5. Pension accounts

Question 2

Requirements for Intervivos, revocable trusts

Answer 2

Must be in writing and signed

Question 3

How are payable on death accounts treated?

Answer 3

Like life insurance policies. When a will addresses these assets, the will doesn’t control

Question 4

For POD’s accounts, is extrinsic evidence permitted?

Answer 4

Yes, extrinsic evidence is permitted to show decedent’s intent as to who takes the contents of the account (even when the account is joint tenancy w/ a right of survivorship)

Question 5

Is there a 120 hr rule for non-probate transfers?

Answer 5

Nah, just need “sufficient evidence” that the recipient survived

Question 6

3 classifications of trusts

Answer 6

1. By manner of creation
2. By time of creation
3. By duties

Question 7

Subcategories of trusts by manner of creation

Answer 7

1. Express
2. Private Express Trusts
3. Charitable Trusts
4. Resulting (implied)
5. Constructive (by law)

Question 8

Subcategories of trusts by time of creation

Answer 8

1. Inter vivos
2. Revocable
3. Irrevocable
4. Testamentary

Question 9

Subcategories of trusts by duties

Answer 9

1. Active

2. Passive

Question 10

3 ways a trust can be created

Answer 10

(1) transfer of property to another person as trustee during the settlor’s lifetime or by will or other disposition taking effect upon the settlor’s death (i.e., a deed of trust);
(2) declaration by the owner of property that the owner holds identifiable property as trustee (i.e., a declaration of trust); OR
(3) exercise of a power of appointment in favor of a trustee

Question 11

Elements of a Valid Private Express Trust (8)

Answer 11

1. The trust must have a valid purpose
2. The settlor must have the capacity to create a trust
3. The settlor must have the intent to create a trust
4. Settlor must deliver assets to trustee
5. The trust must have property
6. must have ascertainable beneficiaries
7. must be in writing
8. must have a competent trustee who has duties to perform

Question 12

(1) The trust must have a valid purpose

Answer 12

Must be for the benefit of it’s beneficiaries

Question 13

(2) The settlor must have the capacity to create a trust

Answer 13

Same capacity required to make a will

Question 14

(3) The settlor must have the intent to create a trust

Answer 14

Self explanatory, use of the word trust/trustee is not required

Question 15

(4) Settlor must deliver assets to trustee

Answer 15

Assets to be held in trust must be delivered to the trust and placed in the trustee’s name

Question 16

(5) The trust must have property

Answer 16

A trust isn’t valid until its funded with property

Question 17

Exceptions to rule about trusts having property

Answer 17

• pour over wills/trusts

- Life insurance trusts

Question 18

What kind of property must inter vivos trusts be funded with?

Answer 18

Must be funded with specifically identifiable property during the settlor’s lifetime to be valid

Question 19

What kind of property must testamentary trusts be funded with?

Answer 19

Funded at the settlor’s death from probate assets

Question 20

(6) The trust must have ascertainable beneficiaries

Answer 20

2 exceptions, 1. a charitable trust, 2. trust created for the care of an animal.

Question 21

When is a beneficiary definite

Answer 21

A beneficiary is definite if the beneficiary can be ascertained now or in the future, subject to any applicable rule against perpetuities

Question 22

(7) The trust must be in writing

Answer 22

Trusts w/ real property need to be in writing to satisfy statute of frauds

Question 23

Requirements needed to create a trust (5)

Answer 23

(1) the settlor has capacity to create a trust;
(2) the settlor indicates an intention to create the trust;
(3) the trust has a definite beneficiary or is:
(A) a charitable trust;
(B) a trust for the care of an animal, as provided in Section 408; or
(C) a trust for a non charitable purpose, as provided in Section 409;
(4) the trustee has duties to perform; and
(5) the same person is not the sole trustee and sole beneficiary

Question 24

Precatory Trusts

Answer 24

Trusts whose language does NOT clearly indicate whether the testator intended to create a trust with fiduciary duties imposed on the devisee or merely an unenforceable moral obligation. Ex. “I hope” “I wish”

Question 25

Constructive Trusts

Answer 25

An equitable remedy to prevent the unjust enrichment of the holder of title to, or of an interest in, property which such holder acquired through fraud, breach of duty or some other circumstance making it inequitable for him to retain it against the claim of the beneficiary of the constructive trust

Question 26

Pour over will

Answer 26

Testator’s will ensures that when they die, their assets immediately go into a previously established trust

Question 27

Can you make a trust for an animal?

Answer 27

Yes

Question 28

When is an animal’s trust terminated?

Answer 28

When the animal dies

Question 29

In her will, T provides: “I leave my entire estate to A, as trustee, to be distributed according to the instructions I told to him before I died.” There is extrinsic evidence that T wanted B to be the sole beneficiary. Is this a valid trust and, if not, who owns the property?

Answer 29

This is not a valid express trust. It is a semi-secret trust. Because the ambiguity is patent, no extrinsic evidence is admissible. The court will enter a resulting trust in favor of T’s estate.

Question 30

In her will, T provides: “I leave my entire estate to A.” There is extrinsic evidence that T intended for A to hold the property in trust for B. Is this a valid trust and, if not, who owns the property?

Answer 30

This is not a valid express trust. It is a secret trust. Extrinsic evidence is admissible to prove the existence of the trust. The court will enter a constructive trust for B

Question 31

3 limits to the freedom of disposition pertaining to trusts

Answer 31

1) limit on the extent to which a settlor may impose a restraint on alienation of a beneficial interest
2) limits on modifying or terminating a trust without the consent of the settlor
3) Removal of a trustee

Question 32

Discretionary and support trusts

Answer 32

• Trustee may be given discretion over when, to whom, or in what amount to make a distribution
  
  • The trustee must exercise the discretion in accordance with the trustee’s fiduciary duties
• Beneficiaries’ creditors generally cannot access the beneficiary’s trust interest and the beneficiary cannot voluntarily alienate his interest

Question 33

Who are spendthrift trusts unenforceable against (3)

Answer 33

1. Child, spouse, or former spouse with a valid order of support or maintenance
2. A creditor who has provided services for the protection of the beneficiary’s interest in the trust
3. The government as a creditor

Question 34

Can a creditor of a beneficiary in a spendthrift trust obtain an order attaching future distributions to or for the benefit of the beneficiary?

Answer 34

No

Question 35

When is a spendthrift provision valid?

Answer 35

Valid only if it restrains both voluntary and involuntary transfers of a beneficiary’s interest

Question 36

Can a beneficiary of spendthrift trust alienate her interest in the trust?

Answer 36

No

Question 37

What is a spendthrift trust?

Answer 37

A trust designed so that the beneficiary is unable to sell or give away her equitable interest in the trust property

Question 38

Types of trusts imposing a limit on the extent to which a settlor may impose a restraint on alienation of a beneficial interest (2)

Answer 38

1. Discretionary and support trusts

2. Spendthrift trusts

Question 39

When can a trust not be terminated (4)

Answer 39

1. It is a spendthrift trust,
2. The beneficiary is not to receive the principal until a specific age
3. It is a discretionary trust, OR
4. It is a trust for the support of the beneficiary

Question 40

2 grounds to modify or terminate a trust without the settlor’s consent

Answer 40

1. By consent of ALL the beneficiaries if the modification is NOT contrary to a material purpose of the settlor
2. Changed circumstances not anticipated by the settlor that would defeat or substantially impair the accomplishment of the purposes of a trust

Question 41

When can a trustee be removed? (3)

Answer 41

1. Ineffective administration,
2. A change in circumstances, OR
3. by consent of all the beneficiaries if removal would be in the best interests of the beneficiaries and not contrary to a material purpose of the settlor

Question 42

When can a non charitable irrevocable trust be modified?

Answer 42

Upon consent of the settlor and all beneficiaries, if the court concludes that modification is not inconsistent with a material purpose of the trust

Question 43

When can a non charitable irrevocable trust be terminated?

Answer 43

Upon consent of the settlor and all beneficiaries, if the court concludes that continuance of the trust is not necessary to achieve any material purpose of the trust

Question 44

Can a non chartiable irrevocable trust be modified or terminated w/out the consent of the settlor and all beneficiaries?

Answer 44

Yes, if the court is satisfied that: (1) if all of the beneficiaries had consented, the trust could have been modified or terminated under this section; and (2) the interests of a beneficiary who does not consent will be adequately protected.