Overview

Question 1

The legal interest is held by the

Answer 1

trustee. trustee has the responsibility of ownership.

Question 2

What benefit does the trustee receive from legal title?

Answer 2

None. except possibly a fee for acting as trustee

Question 3

Trustee is a fiduciary which means there are three duties:

Answer 3

1. must deal with property with reasonable care
2. must maintain utmost degree of loyalty; and
3. personally responsible if conduct falls beneath required standards

Question 4

Who hols the equitable or beneficial interest?

Answer 4

The beneficiary. Usually has little or no control over the trust or the trust property.

Question 5

Who is the settlor?

Answer 5

the person who causes the trust to come into existence by supplying the initial trust property. (aka truster, grantor, donor)

Question 6

A trust must have

Answer 6

trust property. (aka principal, corpus)

Question 7

The settlor creates a trust by

Answer 7

transferring legal title to the trustee and equitable title to the beneficiary.

Question 8

When is the trust terminated?

Answer 8

When the trustee’s duties are completed.

Question 9

What are the purposes and uses of the trust? (6)

Answer 9

1. providing for and protecting trust beneficiaries
2. flexibility of asset distribution
3. protection against settlor’s incompetence
4. professional management of property
5. probate avoidance
6. tax benefits

Question 10

What are the two basic kinds of trusts?

Answer 10

Express trusts; trusts created by operation of law.

Question 11

What are two kinds of express trusts?

Answer 11

1. private - private beneficiaries

2. charitable - charitable beneficiaries

Question 12

What are two kinds of trusts created by operation of law?

Answer 12

1. resulting trusts (attempt to carry out an implied intent)

2. constructive trusts - equitable remedy (remedy to prevent unjust enrichment)

Question 13

What are the 5 main elements of a valid trust?

Answer 13

IIAPM

1. intent
2. identifiable corpus
3. ascertainable beneficiaries
4. proper purpose
5. mechanics and formalities

Question 14

What are the two elements of the intent req.?

Answer 14

1. settlor must intend to split legal and equitable title, and
2. impose enforceable (fiduciary) duties on the holder of legal title

Question 15

Is communication to the beneficiary required to form a trust?

Answer 15

No.

Question 16

The intent must be present, meaning

Answer 16

a promise to create a trust in the future, like a promise to make any future gift, is not enforceable unless the promise is a binging contract (supported by consideration)

Ex: father tells son, you are a good son. tomorrow, i will put 10k in trust for you. tomorrow comes and dad says nvm i’m going to spend the money on vacay instead. Son can’t enforce dad’s promise.

Question 17

But once a gift is completed (an outright transfer of property occurs)

Answer 17

it is too late for the alleged settlor to go back and claim the transfer was really one in trust

Question 18

Split of title - if the trustee and the beneficiary are the same person what happens?

Answer 18

Merger occurs and the trust terminates leaving this person with all legal and equitable title.

Question 19

Because a trust is a property transfer, the property must be…

Answer 19

ascertainable with certainty

Question 20

Does a beneficiary need competence?

Answer 20

No. anyone that can take and hold title.

Question 21

What happens if beneficiaries are not ascertainable?

Answer 21

the property reverts to the settlor, or if the S is dead, to S’s successors in interest.

Question 22

Settlors can create trusts for any purpose except for:

Answer 22

1. illegal purpose
2. require trustee to commit crime or tort
3. purpose contrary to public policy

Question 23

What are the two creation methods of a trust?

Answer 23

1. inter vivos, or living trusts - created while settlor alive
2. testamentary trusts - created in settlor’s valid will

Question 24

What are the two methods of creation of an intervivos trust?

Answer 24

1. declaration of trust, settlor = trustee (Nana)

2. transfer or conveyance in trust, settlor does not qual trustee.

Question 25

A trustee must have the capacity to:

Answer 25

take, hold, and manage property.

Question 26

if no trustee is named or if trustee declines, resigns, is removed, or dies, what happens/

Answer 26

the court will appoint a trustee

Question 27

What are the two ways to transfer (or deliver) property to the trustee?

Answer 27

1. declaration of trust (no conveyance needed as long as property is identified and segregated)
2. conveyance in trust (property must be conveyed - deed or delivery)

Question 28

Can a trust be oral?

Answer 28

Yes unless it involves real property or is contained in a will.

Question 29

What is a pour over will?

Answer 29

a will that leaves property to a previously existing inter vivos trust.

Question 30

What happens to property in a pour over will?

Answer 30

It goes into a trust as trust exists at the date of testator’s death

Question 31

Pour over property can be the initial trust funding if:

Answer 31

1. trust identified in will, and

2. trust executed before the testator’s death

Question 32

What happens if the testamentary gift is silent about trust nature of transfer?

Answer 32

alleged beneficiary of trust can seek a constructive trust remedy against will beneficiary who should be serving as a trust if appropriate facts can be proven.

Question 33

if a testamentary gift is “in trust” but doesn’t state beneficiaries nor state terms, then

Answer 33

the trust fails and the property passes through testator’s estate to successors in interest.

Question 34

inter vivid secret trust - where grant of property looks outright on tis face but there is oral evidence that the grantee promised to use the property for another’ benefit.

Answer 34

grantee not bound unless alleged beneficiary can show evil conduct.

Question 35

Unless the trust provides otherwise (which is usually the case), beneficiaries may transfer their equitable interests

Answer 35

just like they may transfer any other property they own

Question 36

unless the trust provides otherwise (usually does) the beneficiary’s creditors

Answer 36

may reach the beneficiary’s interest in the trust

Question 37

Unless trustee elects to make a payment, the beneficiary has no interest and no interest for creditors to attach. B merely has an _______

Answer 37

expectancy to be the beneficiary of a power of appointment placed into the trust

Question 38

In a spend thrift trust, a beneficiary may not transfer

Answer 38

interest in trust. Only upon payment may the beneficiary transfer the money received.

Question 39

In a spend thrift trust, creditors cannot attach the B’s

Answer 39

trust interest. However, once paid, the B’s creditors can reach that property.

Question 40

In a spendthrift trust, can the settlor also be the beneficiary?

Answer 40

No. Can’t protect your own property from your own creditors.

Question 41

What creditors may a spendthrift trust be ineffective against?

Answer 41

1. support of the beneficiary’s spouse or child

2. creditors who supplied necessaries to the beneficiary

Question 42

What is the effect of a “support provision” in a trust?

Answer 42

trustee may only use property of trust for beneficiary’s health, education, maintenance, and support.

Question 43

What is the standard of support in a support trust?

Answer 43

If the instrument is silent, then accustomed standard of living of beneficiary.