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Bar Prep > Trusts > Flashcards

Trusts Flashcards

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1
Q

Elements of private express trust

A
  1. Present Intent
  2. Trust Property - in the trust
  3. Valid Trust Purpose
  4. Ascertainable Beneficiaries
  5. Writing - only if RP or Testamentary
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2
Q

Delivery of inter vivos trust

A

If settlor is trustee, then simple Declaration of Trust

If third party trustee, declaration of trust must be accompanied by Delivery

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3
Q

charitable trusts

A

Purpose - benefit the community at large. Don’t need to have ascertainable grantees

Exempt from RAP

Cy pres doctrine

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4
Q

Cy Pres

A

court may modify charitable trust to seek alternative charitable purpose if the original purpose becomes illegal, impracticable, or impossible

N/A if there is specific intent
If general intent, apply Cy Pres

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5
Q

Two types of remedial trusts

A

Resulting - happens when the a trust fails. Typically results in settlor getting back property.

Constructive - person holding property engages in wrongful conduct and is unjustly enriched

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6
Q

When can creditors of beneficiary reach trust assets?

A

Only when amounts become payable to beneficiary or beneficiary can demand payment (mandatory trust)

Subject to asset protection trusts

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7
Q

Asset protection trusts

A

Support - creditors can only get at these assets if they are providing a necessity for beneficiary (can ask trustee to pay them)

Discretionary trusts - creditors can only get if the trustee exercises discretion to make payment

Spendthrift - creditors cannot get at trust property. Cannot alienate interest. Creditors can only get at distributions. EXCEPTION: spousal support, necessities, taxes

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8
Q

Is a trust presumed to be revocable or irrevocable?

A

Majority - Presumed revocable

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9
Q

How can an irrevocable trust be modified or terminated?

A

By consent of all beneficiaries

EXCEPTION: Claflin doctrine - If trust is sought to be terminated/modified by agreement by all beneficiaries, trustee can prevent by saying the trust is still serving a material purpose.

If still serving material purpose and settlor is still alive, then by consent of settlor and all beneficiaries.

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10
Q

Trust Income and Principal allocations to beneficiaries

A

CL - life beneficiaries: income, remainderman: principal

Modern: allocation must be balanced to treat life beneficiaries and remaindermen fairly.

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11
Q

Trustee’s power

A

Given powers necessary to act as a reasonably prudent person in managing the trust

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12
Q

Duty of loyalty

A

Duty to act in good faith and reasonably

No self-dealing - breach leads to application of no further inquiry rule

No conflicts of interest

Remedy for breach - either avoid transaction or get profits from it

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13
Q

Duty of care (prudence)

A

Can delegate responsibilities if reasonable. Otherwise, must perform responsibilities

Must oversee decision making

Prudent investor
diversify
impartial
make property productive

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14
Q

Future interests held by grantor

A

possibility of reverter (FSD)

right of re-entry (FSSCS)

reversion (life estate)

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15
Q

Future interests held by beneficiary

A

Remainder (follows life estate)

Executory Interest

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16
Q

How can trustee accept appointment?

A

By complying with method of acceptance

If not specified, by (1) accepting delivery of trust res, (2) exercising powers, or (3) performing duties

17
Q

Semi-secret trusts

A

when will directs that gift is to be held in trust, but doesn’t identify a beneficiary.

It is invalid and the gift is held in trust for testator’s heirs.

18
Q

Automatic termination of trust

A

1 - when revoked or expired

2 - when purpose is satisfied

3 - if purpose becomes illegal

19
Q

When can a court modify a trust?

A
  1. Unanticipated changes
  2. Inability to administer the trust effectively
  3. Trust becomes uneconomic
  4. To correct mistakes
  5. To achieve the settlor’s tax objectives
20
Q

Liability of Trustee - third parties

A

Trustee is personally liable if Trustee acted tortiously or when entering contracts.

Trustee can seek indemnification from Trust if acting within scope of trustee duties.

21
Q

Executory Interest

A

Someone other than the grantor holds a future interest preceded by either

(1) vested remainder subject to divestment; or
(2) fee simple subject to an executory limitation

22
Q

Two types of trust beneficiaries

A

Income beneficiaries - people entitled to income presently

Remainder Beneficiaries - entitled to trust principal upon termination of trust

23
Q

Exceptions to identifiable beneficiaries

A

-Indefinite class - all my friends valid, all my friends equally invalid
-unborn children
-class gifts
-charitable trusts

24
Q

When is trust required to be in writing?

A

-Transfer of real property
-Testamentary trust

25
Q

Pour-over provisions

A

Intervivos trust AND will

It is ok to have will that pours over to trust that wasn’t in existence at time of will execution.

The trust does not need to meet wills requirements, because it is an intervivos trust

26
Q

Disclaimer

A

Must disclaim within nine months of it vesting (either the possessory or future interest)

Disclaimer by income beneficiary (current) - it will pass to the future interest remainder holder

Disclaimer by future interest remainderman - treated as having predeceased the life tenant (either revert to grantor, or if anti-lapse, goes to future interest holder’s estate)

27
Q

When does class gift close?

A

Either when (1) preceding interest dies OR (2) when one member of class entitled to possession

28
Q

Anti-lapse for trusts

A

majority of states don’t allow anti-lapse for trusts

UPC and minority it does apply

29
Q

Allocation of expenses to income and principal

A

Ordinary expenses charged to trust income.

Extraordinary expenses charged to trust principal

30
Q

Allocating assets as principal or income

A

Traditional approach - money generated by trust property is income. Money generated by a conveyance of trust property is principal.

Modern - can re-allocate as deemed necessary for purpose of trust.

31
Q

Power of appointment

A

General vs. Special

Failure to exercise special - goes to (1) takers in default or, if no takers in default, then (2) defined beneficaries

32
Q

Special Power of Appointment

A

Specific person or groups who are the object of the power, to the exclusion of others.

Can give an interest of equal or lesser value in exercising power of appointment.

33
Q
A

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