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MEE > Trusts > Flashcards

Trusts Flashcards

1
Q

REQUIREMENTS OF AN EXPRESS PRIVATE TRUST

To create a trust, a settlor with capacity must:

A
  1. Must intend trust to take effect immediately
  2. Must express intent by words or conduct while settlor owns the property

Precatory expressions (hope, wish, suggestion) result in inference that no trust was intended, but inference may be overcome by other evidence

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2
Q

REQUIREMENTS OF AN EXPRESS PRIVATE TRUST

What happens when a trust fails to name trustee (or failure of trustee to accept or qualify)?

A

does not defeat a
testamentary trust; court will appoint trustee

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3
Q

REQUIREMENTS OF AN EXPRESS PRIVATE TRUST

An ___ will fail without trustee because there can be no valid delivery and
transfer of trust property

A

Inter-vivos trust

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4
Q

REQUIREMENTS OF AN EXPRESS PRIVATE TRUST

Trust Property may be of any type, including ___

A

future interests

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5
Q

REQUIREMENTS OF AN EXPRESS PRIVATE TRUST

Trust propertt must be proerty that the settlor has the power to___

A

Convey

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6
Q

REQUIREMENTS OF AN EXPRESS PRIVATE TRUST

Trust property must be described with ___

A

Certainty

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7
Q

REQUIREMENTS OF AN EXPRESS PRIVATE TRUST

2 Requirments for a Beneficiary of a Trust

A
  1. Must be capable of taking and holding title to property
  2. Must be definite (ascertainable within the period when all interests must vest
    under the Rule Against Perpetuities); e.g., “friends” is insufficient

Notice not required but beneficiary must accept; acceptance is presumed

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8
Q

REQUIREMENTS OF AN EXPRESS PRIVATE TRUST

A trust must also have a valid:

A

Trust Purpose

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9
Q

REQUIREMENTS OF AN EXPRESS PRIVATE TRUST

Trust or provision must not be:

A

a. Illegal;
b. Impossible to achieve;
c. Contrary to public policy (e.g., induce crimes, torts, divorce, child neglect,
etc.);
d. Intended to defraud settlor’s creditors; or
e. Based on illegal consideration

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10
Q

REQUIREMENTS OF AN EXPRESS PRIVATE TRUST

What is the effect of an invalid condition subsequent?

A

condition stricken, but trust is valid

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11
Q

REQUIREMENTS OF AN EXPRESS PRIVATE TRUST

What is the effect of an invalid condition precedent?

A

Condition stricken but ct decide whether interest is valid or fails

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12
Q

REQUIREMENTS OF AN EXPRESS PRIVATE TRUST

Formalities of an intervivos trust

A

a. Declaration of trust by property owner that he holds in trust, or
b. Transfer of property by the settlor to the trustee

No writing required unless trust of land

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13
Q

REQUIREMENTS OF AN EXPRESS PRIVATE TRUST

Formalities of a testamentary trust

A

Essential terms must be ascertained from will, incorporated document, facts
of independent significance, or exercise of power of appointment

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14
Q

REQUIREMENTS OF AN EXPRESS PRIVATE TRUST

What happens if a settlor created a semi-secret trust in his will?

Semi-Secret Trust = gift in trust but no benef

A

The trust will be held for the testator’s/settlors heirs

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15
Q

What happens if a settlor created a secret trust in his will?

Secret Trust = absolute gift but trust intended

A

a constructive trust is imposed

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16
Q

TRANSFER OF BENEFICIARY’S INTEREST AND CREDITOR’S RIGHTS

A ___ provides that beneficiary may not voluntarily or involuntarily transfer his interest (i.e., cannot sell or give away interest, and creditors cannot
reach it)

A

Spendthrift Trust

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17
Q

A spendthrift trust is not valid if:

A

The settlor is also a beneficiary

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18
Q

A spendthrift trust is unenforceable against a claim brought by:

A

government or by child, spouse, or former
spouse with support order

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19
Q

In a ___ trust, a trustee has discretion to pay or withold income or principal

A

Discretionary Trust

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20
Q

A trustee’s interest can only be reached by creditors in a discretionary trust if:

A

a trustee makes discretionary payment

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21
Q

A ____ Cannot Be Assigned or Reached Even Without Spendthrift Clause

A

Support Trust

22
Q

MODIFICATION AND TERMINATION OF TRUST

Under the UTC, trusts are presumed:

by settlor

A

revocable and amendable unless terms expressly state
otherwise

23
Q

MODIFICATION AND TERMINATION OF TRUST

Under the tradtional rule, a settlor must:

A

Reserve the right to revoke or modify the trust

24
Q

MODIFICATION AND TERMINATION OF TRUST

A beneficary may terminate or modify a trust if:

A

a. Settlor and all beneficiaries consent, even if it conflicts with a material purpose; or
b. All beneficiaries consent, and no material purpose would be frustrated

Examples of purposes precluding termination—distribution at specific
age, preserving property for remainderman, protecting beneficiary from own poor judgment

25
Q

MODIFICATION AND TERMINATION OF TRUST

A trustee may terminate a trust if:

A

trust property is less than $50,000 and is insufficient to justify administration cost

26
Q

MODIFICATION AND TERMINATION OF TRUST

Who makes the following modifications to a trust?

  1. May modify if trust could have been modified if all beneficiaries had consented
    and interests of nonconsenting beneficiaries will be protected
  2. May terminate or modify if circumstances unanticipated by settlor threaten trust
    purpose
  3. May modify if continuation of trust is impracticable or wasteful
  4. May modify or terminate if value is insufficient to justify administration cost or
    achieve tax objective
  5. May reform to reflect settlor’s intent if clear and convincing evidence shows
    settlor’s intent and trust were affected by a mistake
A

Court

27
Q

TRUST ADMNISTRATION

WHAT ARE THE 4 POWERS OF A TRUSTEE?

A
  1. Powers expressly conferred by trust
  2. Powers an individual has over own property unless limited by trust
  3. Powers appropriate to achieve investment, management, and distribution of trust property not forbidden by trust
  4. Powers conferred by UTC unless limited by trust
28
Q

TRUST ADMNISTRATION

A settlor can waive which type of restrictions?

A

self-dealing restrictions

29
Q

TRUST ADMNISTRATION

If the duty of loyalty is breached, the transaction is voidable by benef unless

A

1) Transaction authorized by trust or approved by court;
2) Beneficiary failed to bring suit within prescribed time period;
3) Beneficiary consented, ratified transaction, or released trustee; or
4) Transaction involves contract or claim from before trustee became trustee

30
Q

TRUST ADMNISTRATION

The trustee owes 6 duties to the trust

Always Loved Really Salty Egg Products

A
  1. administer trust
  2. loyalty (no self dealing)
  3. report
  4. separate trust prop
  5. enforce claims and defend trust from attack
  6. preserve property and make it productive
31
Q

TRUST ADMNISTRATION

Under the duty to report, a trustee must:

A

keep benefs reasonably informed

32
Q

TRUST ADMNISTRATION

Under the duty to keep separate property, a trustee must:

A

not commingle trust prop with own prop

33
Q

TRUST ADMNISTRATION

If portion of commingled assets increases in value, presumed to be:

A

Trust assets

34
Q

TRUST ADMNISTRATION

If portion of commingled assets declines in value, presumed to be

A

Trustees assets

35
Q

TRUST ADMNISTRATION

If trustee commits breach of trust, court can:

A

a. Order specific performance of trustee’s duties;
b. Issue injunction against trustee;
c. Compel trustee to pay money or restore property; and
d. Suspend or remove trustee

36
Q

TRUST ADMNISTRATION

What are a trustee’s defenses to breach of duties?

A
  1. reasonable reliance on trust terms
  2. benef consented, released trustee from liability or ratified transaction
37
Q

TRUST ADMNISTRATION

Exculpatory clauses are void if they:

A

relieve trustee of liability for breach committed in bad faith or reckless indifference or appear in trust because of trustee’s abuse of confidential relationship with settlo

38
Q

Trustee not liable for acts of co-trustees if:

A
  1. did not join in action and
  2. exercised reasonable care in preventing breach or compelling co-trustee to redress breach
39
Q

Allocation of Receipts and Expenses

Under the Uniform Principal and Income Act
(“UPAIA”)

A
40
Q

A __ automatically terminates if the benf predeceases the depositor

A

Totten trust

41
Q

A ___ is an equitable remedy to prevent unjust enrichment

A

Constructive Trust

42
Q

A constructive trust arises in situtations of:

The Fraudster Beat Banks

A
  1. Theft or conversion
  2. Fraud, duress, undue influence, mistake, or interference with contract relations
  3. Breach of fiduciary duty (e.g., attorney/client, director/corporation, trustee/beneficiary)
  4. Breach of fraudulent promise, promise by one in confidential relationship, promise concerning will or inheritance, promise to forgo foreclosure bid
43
Q

A ___ is one where the trustee is REQUIRED to pay or apply so much of the trust as necessary for the support of the beneficiary

A

Support Trust

44
Q

In administering a ____, a trustee does not have discretion to refuse to pay bills necessary for the benef

A

Support Trust

might need to analyze whether or not an expense is “necessary” for the benef support

45
Q

In administering a discretionary trust, the benef cannot interfere w/ the exercise of the trustees discretion unless:

A

The trustee abuses her power

A ct will not interfere unless the trustee acts in bad faith or dishonestly

46
Q

The trustee’s duty of loyalty extends to:

A

All benefs equally

47
Q

Althought permitted by the UTC, most sttes do not permit a guardian to consent to the termination of a trust on behalf of:

A

Unborn benefs

48
Q

The presence of a ___ precludes termination of a trust because it shows the settlor’s ___ and manifests his lack of confiedence in the judgment and management ability of the ____

A

Spendthrift provision

Purpose

Benef

49
Q

Under the trad. view, to create a valid pour over gift from a will to a revocable trust, the trust must:

A
  1. be in existence or
  2. must be executed at the time of the will’s execution

However, under the prevailing view, the trust may be established after the will is executed but before the testator’s death

50
Q

Pour over gifts are valid even if:

A

Unfunded during testator’s lifetime

51
Q

A ___ is one where the benf cant transfer his interest in the trust

A

Spendthrift trust

creditors are also generally unable to collect or attach such rights

52
Q

Spendthift Trust Exception for Creditors

A

A creditor may collect or attach rights to a trust if a settlor (who is also a beneficary) included a spendthrift provision in order to protect his own interests

In this case, creditors can reach a benefs right just as if the provision didnt exist

MEE (6 decks)

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