Pg 27

Question 1

Is it possible to have a trusteeship foisted on you?

Answer 1

No, you must affirmatively accept the role or receive trust property and then exercise trustee responsibilities over it. It is not possible to accept by silence.

Question 2

If a settlor sent trust property to someone and he held onto it but didn’t actively manage it, what would he be considered?

Answer 2

A bailee because he didn’t accept the duties of a trustee

Question 3

Is a trustee permitted to decline to serve?

Answer 3

Yes

Question 4

What is a de facto trustee?

Answer 4

If you take on trustee duties, even though you’re not appointed as a trustee, then you are liable as a trustee would be

Question 5

What happens of a trustee resigns or dies?

Answer 5

If the settlor named a successor trustee, that person takes over, or the court can appoint a new one

Question 6

In what situation under the common-law and the UTC can a trustee resign?

Answer 6

• CL: once a trustee accepts the trusteeship, he can only resign or withdraw by getting consent of the settlor, which might be impossible because the settlor might be dead, or the consent of all the beneficiaries
  – UTC: you can withdraw after giving 30 days written notice

Question 7

If there is a creditor of the trustee in his fiduciary capacity, where does he recover from?

Answer 7

Directly out of the trust fund and he has no recourse against the trustee personally.

Question 8

Do personal creditors of the trustee have recourse against trust property?

Answer 8

No

Question 9

What are the duties a trustee owes?

Answer 9

Fiduciary duties like duty not to commingle trust property with his own

Question 10

What are the four major functions of a trusteeship?

Answer 10

– custodial: take custody of trust property and safeguard it
– administrative: account and recordkeep plus file taxes
– investment: prudently invest assets through a strategy that is reasonably suited to the trust purpose and the beneficiary circumstances
– distribution: make disbursement of income or principal to the beneficiaries according to the trust terms

Question 11

What is the beneficiary of a trust?

Answer 11

The recipient of a gift made by the settlor. The beneficiary holds equitable title and is intended to benefit from the trust, but doesn’t get the gift directly. The gift is provided to the trustee on behalf of the beneficiary

Question 12

Who can be a beneficiary of a trust?

Answer 12

Anyone or anything: insane person, animal, minor, charity, inanimate object like a work of art, or another trust

Question 13

Who do trustees owe fiduciary duties to?

Answer 13

The beneficiaries

Question 14

What are the fiduciary duties that a trustee owes to a beneficiary?

Answer 14

- duty of loyalty
– duty of prudence
– duty of impartiality
– duty to not commingled
– duty to inform and account

Question 15

What is involved in the duty of loyalty from a trustee to a beneficiary?

Answer 15

The trustee must administer the trust solely in the interest of the beneficiaries and is prohibited from self dealing

Question 16

What is involved in the duty of prudence from a trustee to a beneficiary?

Answer 16

Trustee is held to an objective standard of care and must administer the trust in the way suited to the purpose of the trust and the needs of the beneficiary

Question 17

What is involved in the duty of impartiality from a trustee to a beneficiary?

Answer 17

The trustee must show due regard for the interest of the beneficiary

Question 18

What is involved in the duty to not commingle between a trustee and beneficiary?

Answer 18

The trustee must not commingle his own property with trust property

Question 19

If a trustee breaches one of his duties to the beneficiary, what happens?

Answer 19

The beneficiary gets remedies like: compensatory damages, disgorgement of any profits, the trustee can be denied compensation for his role as a trustee and removed, etc.

Question 20

Do trusts have to be in writing?

Answer 20

Only if they are testamentary or real property is involved

Question 21

What are things that are not necessarily required for a trust but are good practice?

Answer 21

• put the trust in writing
  – have it signed by the settlor and the trustee
  – have it notarized with a date at the beginning and the end
  – have a free pour over will

Question 22

Why is it smart to have a trust notarized?

Answer 22

Because many states require notarization, so the trust will be good in most states

Question 23

Why is it smart to have a trust dated at the beginning in the end?

Answer 23

So that you know which one you’re dealing with if there are multiple trusts

Question 24

Why is it smart to always do a free pour over will with regard to a trust?

Answer 24

As a backstop or broom to sweep in anything that didn’t get transferred, then you can use the probate estate as a pour over will

Question 25

Does the name of a trust dictate how it functions?

Answer 25

No, if there are extra terms in the label like “revocable” or “living trust”, that doesn’t control over the substance of the language in the trust. Explicit operative language controls.

Question 26

What are the elements of a valid trust?

Answer 26

– settler manifests intent to create a trust
– ascertainable beneficiaries
– trust res/property that is designated as being subject to the trust
– no grounds to find the trust invalid

Question 27

What are the components of a settler manifesting intent to create a trust?

Answer 27

– the settlor must have intent to create a present trust relationship
– the settlor must appropriately manifest intent to create a trust relationship
– the trustee must agree to be the trustee

Question 28

Do you have to use the word trust in order to create a trust?

Answer 28

No

Question 29

If a court isn’t sure if a trust was created, what controls?

Answer 29

Substance over form controls

Question 30

If a settlor says he is putting $10,000 in a bank account in A’s name on behalf of B, but he doesn’t know what a trust is, can a court decide that a trust occurred?

Answer 30

Yes, and just because the settlor uses the word trust that doesn’t mean that the court will find that a trust exists.

Question 31

What is required with regard to timing for the intent to create a trust?

Answer 31

It must be intent to create a present trust, not a trust sometime in the future

Question 32

What is precatory intent with regard to a trust?

Answer 32

Just expressing a hope, wish, recommendation, or desire that the transferee will use property for a third-party or a specified purpose. This is not a binding instruction. I.e.: this bank account is in A’s name and I hope he will use it for B’s education, but it is up to A.“