Rights of Beneficiaries and Creditors to Distribution

Question 1

What are income bene’s

Answer 1

they receive income from the trust (profits from a buss held by the trust

Question 2

What is remainder bene

Answer 2

entitled to the trust principal upon termination of the trust

Question 3

What is the difference between lapse and anti lapse

Answer 3

Under CL, if a bene dies before the settlor (creator) of the trust dies, the gift to the bene lapses (fails)

Under modern anti lapse statues (applicable in CA) the beneficiary was blood-related to the settlor, the bene surviving issue (child) will take in his/her place.

Limitations: if the bene is a class, only the members of the class who are alive at the time of the execution of the trust will rec the benefit of the trust.

Question 4

What is a discretionary Trust?

Answer 4

Trustee is given complete discretion re whether or not to apply payments of income/principal to the bene; creditors have the same rights as a bene if trustee exercise discretion to pay

Question 5

What is a mandatory Trust

Answer 5

Trustee has no discretion; the trust governs when trust property is to be distributed.

Question 6

What is Alienation?

Answer 6

A bene’s equitable interest in trust property is freely alienable. It can be sold or used as collateral for a loan unless a staute or trust instruments limits this right.

Question 7

What is a support Trust?

Answer 7

Directs trustee to pay income or principal as necessary to support trust bene, creditors cannot reach these assets unless providing a necessity to bene

Question 8

What is a spendthrift Trust

Answer 8

1.Expressly restrict bene’s power to voluntarily or involuntarily
transfer his equitable interest

2. Creditors usually cannot reach the trust interest, unless money is owed for child/sposyal support, basic neck providers or tax lien hodlers
3. surplus: if a bene is reciving more money than necessary to maintain his current lifestyle, any extra money that he is receiving can be reached by creditor