Trust Essay misses Flashcards
Class Gifts
Class closes when a member can call for distribution
A class member usually does not have to survive until the class closes
Trust Disclaimer
Beneficiary has the right, within a reasonable time, to disclaim interest. BUT not if there was express or implied acceptance.
Interest passes as though disclaiming party predeceased.
In most states, must be in writing and filed with 9 months of decedent’s death.
Anti-lapse statutes and trusts
Generally do not apply to trusts.
Some states they do apply. In these states gifts to a class will pass to surviving descendants of deceased beneficiaries by representation.
Duty to Preserve and Protect Trust Corpus
Trustee must exercise reasonable care with respect to trust property:
- invest within a reasonable time and
- sell/reinvest as needed.
Uniform Prudent Investor Act
Prudent, Invest, Act
Invest - Regulates trustee’s investment responsibilities.
Prudent - Trustee must invest and manage assets as a prudent investor would.
Act - Trustee must act for the benefit of the beneficiary and act impartially towards them
Prudent investor
- Considers - takes into account purposes, terms, distribution requirements, and circumstance of trust
- Care/Skill/Caution - exercise reasonable care, skill, and caution. (evaluated as to overall portfolio)
- Diversify - diversify unless circumstances indicate trust purposes would be better served otherwise
Support Trust
Trustee must apply so much of the trust as necessary for beneficiary’s support
No discretion to refuse
Discretionary Trust
Trustee has discretion whether to apply or withhold payment
Beneficiary cannot interfere with trustee’s exercise of discretion UNLESS abusing power
Generally, court will not interfere unless trustee acts in bad faith or dishonestly
Trust termination by beneficiaries
Most states permit termination by beneficiaries ONLY IF:
1. all consent
2. modification will not interfere with material purpose
material purpose waived if Settlor joins in
Spendthrift provisions preclude termination of a trust because it shows Settlor’s material purpose and manifests lack of confidence in the judgment and management of a ben
Trustee Duties (Trusts)
ELCRAP - You’ll be in EL CRAP if you breach a fiduciary duty
E Enforce claims and defend
L Loyalty
C no Commingling
R Report
A Administer Trust
P Protect and make productive
Duty of Loyalty
Absolute Loyalty to the bens.
Everything in best interest of the bens
No self-dealing/conflicts of interest (without court approval or contrary trust provision)
- Good faith or benefit to the trust are irrelevant
Self-dealing Transaction - beneficiary’s rights
Transaction is voidable by the affected ben UNLESS:
PACT
- Pre-trustee: it involves a contract or claim arising before trustee became trustee;
- Approval: court or terms approved it;
- Consent: ben gave consent, ratification, or release; or
- Time: ben failed to bring suit within prescribed time
Duty to Report
- provide bens with trustee’s name, address, phone
- provide trust administration info and a copy of instrument if requested
- furnish annual accounting
Duty to Preserve and Make Productive (damages)
Damages = amount that would have accrued from proper investments
Duty to Administer Trust
personally administer the trust:
FATPII
1.F in good faith and
2. in accordance with the terms and purposes of the trust instrument and
3. in a prudent manner,
4. in the interests of the bens and impartially
