Trusts

Question 1

Who is the settlor?

Answer 1

Party that creates trust, usually donor

Question 2

What are the 7 requirements for a Trust?

Answer 2

1. Settlor with capacity
2. Definitive Beneficiary
3. An intent to create trust
4. Trustee
5. Identifiable corpus (trust property)
6. Proper purpose (non-legal)
7. State formalities

Question 3

Is a trust revocable (UTC)

Answer 3

Yes. a trust is revocable by default UNLESS stated otherwise (UTC)

Question 4

What does a pour-over provision in a will do?

Answer 4

It gifts property to a PREVIOUSLY established trust. no new trust is made. So it must be connected to an inver vivos trust.

Question 5

Charitable trusts

Answer 5

to confer a benefit to society.
Intent must be altruistic.

Question 6

Will a charitable trust that fails to state a specific purpose or beneficiary fail?

Answer 6

No. Instead court will select a purpose or beneficiary consistent with settlor’s intent.

Question 7

Discretionary Trust is

Answer 7

when trustee has ABSOLUTE discretion and power to determine when and how much of the trust property is distributed to the beneficiaries of the trust.

Question 8

What factors are looked at to see if trustee abused their discretion?

Answer 8

1. terms of trust instrument; and
2. the other duties of the trustee

Question 9

Can creditors generally reach a spendthrift interest?

Answer 9

Not generally.

Question 10

What are some exceptions where a spendthrift interest can be reached by creditors?

Answer 10

1. judgment creditor who has provided services for the protection of a bene interest in trust.
2. creditor who furnishes necessities…
3. an order for child support or alimony
4. any claim by state or fed gvt
5. self-settled trust where the settlor retains an interest

Question 11

Can a trustee engage in self-dealing?

Answer 11

No. Duty of loyalty

Question 12

Can beneficiaries seek damages for trustee’s self dealing?

Answer 12

Yes

Question 13

What does impartiality mean (in terms of trustees)

Answer 13

it means that trustee cannot be influence by his personal favoritism or animosity toward individual beneficiaries when administering the trust.

Question 14

What does the Prudent Investor Rule require?

Answer 14

trustee exercise the degree of care, skill, and prudence of a reasonable investor investing his own property.

Question 15

The following items must be allocated to income:

Answer 15

1. receipt of rental payments from real or personal property
2. money received from an entity
3. ordinary expenses and repairs

Question 16

The following items must be allocated to principal:

Answer 16

1. proceeds from sale of principal assets.
2. all other property received
3. extraordinary expenses and repairs

Question 17

When can remainder beneficiaries get trust property?

Answer 17

Only after the termination of trust

Question 18

When is general power of appointment granted?

Answer 18

when the testator/settlor does not leave any conditions or restrictions as to appointment of property.