Trusts

Question 1

Express Trust

Answer 1

created intentionally

Question 2

Private Express Trust

Answer 2

created to benefit private, non-charitable beneficiaries

Question 3

Charitable Trusts

Answer 3

has some charitable purpose, rather than conferring benefit on individuals

Question 4

Implied trusts

Answer 4

Arise by operation of law

Question 5

Constructive Trusts

Answer 5

imposed to deprive wrongdoer from retaining improperly obtained property

Question 6

Resulting Trusts

Answer 6

imposed irrespective of wrongdoing when the circumstances require it

Question 7

Parties to a trust

Answer 7

Settlor, trustee, beneficiary

Question 8

Income beneficiary

Answer 8

present interest in the trust fund

Question 9

Remainder beneficiary

Answer 9

remainder interest in trust fund, generally principal

Question 10

Duties of Trustee

Answer 10

Loyalty and good faith

Question 11

Elements of a Trust

Answer 11

1) a settlor with capacity and mandatory language
2) delivery of specific trust property
3) an ascertainable beneficiary
4) active duties imposed on the trustee
5) a proper trust purpose
6) a trustee

Question 12

Property that cannot be put into trust

Answer 12

Mere expectations, unearned profits, debts owed to trustee

Question 13

Purpose that offends public policy

Answer 13

Delete that language, determine what settlor would have wanted instead

Question 14

Totten Trust

Answer 14

arrangement with a bank that allows the depositor to open a bank account in depositor’s name as trustee for other parties

Question 15

Wait and see doctrine

Answer 15

court’s determination of whether RAP has been violated depends upon what actually happens rather than what might happen

Question 16

Duty of loyalty

Answer 16

-prohibited from self dealing in any manner
-cannot obtain any personal benefit beyond fees
- cannot interact with beneficiaries and have business with them
-cannot have even apparent conflicts of interest

Question 17

Principal

Answer 17

amount originally received, plus capital gains less debts, expenses and capital losses

Question 18

Income

Answer 18

interest, receipts, dividends, and other income earned by principal

Question 19

Disposition of principal

Answer 19

sales proceeds, stock dividends are allocated to principal of trust and protected for ultimate distribution
-extraordinary repairs

Question 20

Disposition of income

Answer 20

rents and cash dividends are allocated to trust income and distributed to income beneficiaries
-ordinary expenses

Question 21

Prudent Busi8ness Person Rule

Answer 21

Trustees must use degree of skill, care, and prudence that would be reasonably used by a business person in their own personal affairs

Question 22

Liability for duty to beneficiaries

Answer 22

Always liable for results of breach

Question 23

Liability for breach of duty of care in investing

Answer 23

must personally recompense trust for losses

Question 24

Liability for successor-trustee liability

Answer 24

IF T knew of previous T’s breach and failed to take appropriate action, liability attaches

Question 25

Support Interest

Answer 25

trustee provides only so much as is necessary for B’s support and no other purpose

Question 26

Discretionary Interest

Answer 26

trustee pays as much income as trustee believes desirable

Question 27

Spendthrift

Answer 27

provision in a trust that says the beneficiary cannot voluntarily transfer their property nor can creditor attack it

Question 28

Termination

Answer 28

irrevocable unless terms expressly provide for revocation

Question 29

Termination by Merger

Answer 29

if sole trustee becomes only beneficiary, trust ceases to exist and trustee becomes owner of trust assets

Question 30

Termination by Operation of Law

Answer 30

-trust property has been consumed or destroyed
- purpose has been fully accomplished
-material purpose has become illegal, impossible, or impractical

Question 31

Clafflin Doctrine

Answer 31

trust cannot be terminated before time specified by settlor, even if all B’s agree

Question 32

Cy Pres

Answer 32

if settlor’s exact charitable purpose cannot be met, court can direct the application of the trust property to another charitable trust