Trusts

Question 1

Trust Creation

Answer 1

To create a valid trust, there must be a settlor who intending to create a trust for a valid trust purpose, delivers the trust property to the trustee to hold for the benefit of one or more beneficiaries

Question 2

Express Trust

Answer 2

An express trust arises out of the expressed intention of the owner of the property to create the relationship

Question 3

Charitable Trust

Answer 3

A charitable trust is a trust that is created to benefit the public at large. The beneficiaries of a charitable trust are usually indefinite but can be limited but not so much to only benefit a few individuals. If purpose of this kind of trust is not possible then the Cy Pres doctrine applies. The cy pre doctrine allows the court to distribute the property “as near as possible” to the settlor’s wishes. It also may be perpetual as the rule against perpetuities does not apply.

Question 4

Discretionary Trust

Answer 4

In a discretionary trust, the trustee is given discretion whether to apply or withhold payments of income or principal to a beneficiary. The trustee must also follow whatever directions that have been left by the settlor when making decisions in his discretion and can be held responsible for the abuse of that discretion if decisions are made unreasonably or for personal reasons. Beneficiaries and creditors can’t compel payments, but a creditor can attach to the trust and can be paid as the trustee sees fit

Question 5

Spendthrift Trust

Answer 5

precludes the beneficiary from transferring interest in the trust and creditors are precluded from reaching the trust assets. However, judgments or court orders for support or maintenance of the beneficiary’s child, spouse, or former spouse.

Question 6

Support Trusts

Answer 6

A support trust directs the trustee to pay only so much of the income or principle as is necessary for the beneficiary’s support

Question 7

Testamentary Trust

Answer 7

Testamentary trusts are created in the settlors valid will. Trust intent and the essential terms of the trust be ascertained from the will itself, from a writing incorporated by reference into the will, or from the exercise of a power of appointment created by the will

Question 8

Duties of the Trustee

Answer 8

A trustee has certain duties that are owed. In a revocable trust the trustee has a duty to the settlor and in a revocable trust, the duty is owed to the beneficiaries. The trustee has a duty to administer the trust, a duty of loyalty, and a duty to administer the trust property

Question 9

Duty of Loyalty

Answer 9

Absent waiver or consent, a trustee must not take part in any transaction involving the trust in their individual capacity.

Question 10

Duty to administer trust

Answer 10

A trustee has the duty to administer the trust property with good faith and in a prudent manner in accordance with the instructions of the settler.

Question 11

Modification of a trust

Answer 11

As a general rule, a settlor is able to unilaterally amend or terminate a trust unless the trust is considered irrevocable. The trust also can be terminated or amended if all of the beneficiaries and the settlor agree to it even if the it is contrary to the terms or the purpose of the trust.

Question 12

Reformation

Answer 12

A trust may be reformed if the court has clear and convincing evidence that there was a mistake in the creation of the trust

Question 13

UIPA

Answer 13

Under the UIPA, the trustee of a trust must use reasonable care and skill when investing and diversifying the trust property. The trustee must also diversify the investments of the trust property unless it is reasonably determined that the trust property is better served without the diversification

Question 14

Inter vivos Trust

Answer 14

Are trusts created while the settlor is alive either by the settlor declaring themselves trustee for another or by the transfer of property to another as trustee

Question 15

Pour over will

Answer 15

a settlor can make gifts by will to a trust established during the settlor’s lifetime. The trust must be in existence before at the time the will is made and must be clearly identified

Question 16

Beneficiary

Answer 16

the beneficiary is a person for whose benefit property is held in trust

Question 17

Anti-lapse

Answer 17

An anti lapse statute will come into play if a beneficiary predeceases the testator

Question 18

Class Gifs

Answer 18

Beneficiaries may be designated by generic descriptions. Beneficiaries may be unascertainable when the trust is created as long as they are ascertainable when they are to benefit

Question 19

Definite Beneficiary Rule

Answer 19

There must be definite beneficiaries to have a private trust.

Question 20

Disclaimer

Answer 20

Under the law of most sates, a beneficiary may disclaim an interest by filing a written instrument with the trustee.

Question 21

Resulting Trust

Answer 21

arises where a settlor has conveyed property to a trustee under an express trust and 1. The trust is void or unenforceable, 2. The beneficiary is dead or cannot be located. It may also arise on failure of a charitable trust where the cy pres doctrine is inapplicable.

Question 22

A general power of appointment:

Answer 22

is a power exercisable in favor of anyone, including the donee themselves, their, estate, their creditors, or the creditors of their estate

Question 23

special power of appointment

Answer 23

is a power exercise able in favor of a limited class of appointees, which does not include the donee, their estate, their creditors, or the creditors of their estate