Trusts

Question 1

Trust Validity

Answer 1

A trust of personal property is valid if it has a trustee, a beneficiary, and trust property and the settlor has an intent to create the trust

Question 2

Trust Revocation

Answer 2

Under the Uniform Trust Code, the default rule is that a trust is revocable. Even irrevocable trusts can still be terminated or modified in some circumstances.

Question 3

Termination by Settlor

Answer 3

A settlor may terminate the trust if all beneficiaries are in existence and all agree to the termination

Question 4

Termination by Beneficiaries

Answer 4

After a settlor dies, a trust can be revoked if all beneficiaries unanimously consent and if there is not material purpose of the trust yet to be performed

Question 5

Promise to Create Future Trust

Answer 5

A settlor’s promise to create a trust in the future is valid only if: (i) supported by consideration, or (ii) he manifests anew an intention to create the trust when the assets come into existence

Question 6

Support Trust

Answer 6

• In a support trust, the trustee is required to apply as much of the trust as is necessary for the beneficiary’s support

Question 7

Discretionary Trust

Answer 7

In a discretionary trust, the trustee is given discretion whether to apply or withhold payment of trust property to the beneficiary
A beneficiary can only interfere with the trustee’s discretion if the trustee abuses their power

Question 8

Trustee Fiduciary Duties

Answer 8

A trustee has three fiduciary duties: (i) the duty to preserve trust property and make it productive, (ii) the duty to make sure the trust supports the beneficiary, and (iii) the duty to remain loyal to remaindermen

Question 9

Spendthrift Trust

Answer 9

A spendthrift trust prohibits the beneficiary from voluntarily or involuntarily transferring his interest in the land. A settlor-beneficiary cannot protect his own interests from creditors by a spend-thrift provision

Question 10

Pour-Over Gift

Answer 10

Under the traditional view, to create a valid pour-over gift from a will to a revocable trust, the trust must be in existence or must be executed at the time of the will’s execution
Under the prevailing view, the trust may be established after the will is executed but before the testator’s death

Question 11

Powers of Appointment

Answer 11

A person writing a will or trust can give their beneficiaries a power of appointment which enables them to designate who will receive specific property

Question 12

Definite Beneficiaries

Answer 12

Definite beneficiaries are necessary to the validity of a trust. They must be susceptible to identification at the time the trust is distributed. Beneficiaries may be a class as long as the class is sufficiently definite.

Question 13

Trust Fails

Answer 13

If a trust fails, a resulting trust in favor of the settlor or their successors is presumed.

Question 14

Beneficiary Claimant

Answer 14

Unless states otherwise, a beneficiary’s claimant can generally reach the beneficiary’s interest to satisfy their claims. They can only reach the interest though, not the trust property itself

Question 15

Cy Pres Doctrine

Answer 15

The doctrine applies when a specific charitable purpose indicated by the settlor is no longer possible and the settlor manifested a general charitable intent. The court can name a new charity as close as possible to the original one.

Question 16

Uniform Prudent Investor Act

Answer 16

Under the UPIA, the trustee must invest and manage the trust assets as a prudent investor would. There is also a duty to diversify unless provided otherwise.