Trusts

Question 1

Trust Definition

Answer 1

a fiduciary relationship in which a trustee holds legal title to specific property under a fiduciary duty to manage, invest, safeguard, and administer the trust assets and income for the benefit of designated beneficiaries, who hold equitable title

Question 2

Trustee’s Duties

Answer 2

(1) deal with the property with reasonable care; (2) maintain the utmost degree of loyalty; (3) is personally responsible if their conduct falls beneath required standards

Question 3

Resulting Trust

Answer 3

arises from presumed intention of the owner of the property

Question 4

Constructive Trust

Answer 4

equitable remedy used to prevent unjust enrichment

Question 5

Elements of a valid trust

Answer 5

(1) intent (2) identifiable corpus (3) ascertainable beneficiaries (4) proper purpose, and (5) mechanics and formalities

Question 6

Express Trust Elements [UTC]

Answer 6

(1) a settlor with capacity to convey, (2) a present intent to create a trust relationship, (3) a competent trustee with duties, (4) a definite beneficiary, and (5) the same person is not the sole trustee and sole beneficiary

Question 7

Trust purpose is invalid if it is

Answer 7

(i) illegal, (ii) contrary to public policy, (iii) impossible to achieve, or (iv) intended to defraud the settlor’s creditors or based on illegal consideration

Question 8

A person accepts trusteeship by

Answer 8

(1) signing the trust or a separate written acceptance; (2) substantially complying with the acceptance terms in the trust instrument; or (3) accepting delivery of trust property, exercising power or performing duties as trustee, or indicating acceptance

Question 9

A trust may be terminated or modified upon the consent of

Answer 9

the settlor (or his agent, conservator, or guardian) + all beneficiaries, even if the modification or termination conflicts with a material purpose of the trust

Question 10

A trust may be terminated or modified on the consent of only

Answer 10

all beneficiaries, but only if no material purpose of the trust would thereby be frustrated (“Claflin Rule”)

Question 11

A court may terminate or modify a trust because there is no unanimous consent between the beneficiaries if:

Answer 11

(1) the trust could have been modified if all beneficiaries had consented + (2) the interests of any nonconsenting beneficiaries will be adequately protected

Question 12

A court may terminate or modify a trust if:

Answer 12

(i) unanticipated circumstances threaten the purposes of the trust; (ii) continuation of the trust on its existing terms is impracticable or wasteful; or (iii) the value of the trust is insufficient to justify the cost of administration or to achieve the settlor’s tax objectives

Question 13

A charitable trust:

Answer 13

(i) must have indefinite beneficiaries, (ii) it may be perpetual, and (iii) the cy pres doctrine applies