Trusts

Question 1

If the specific property is not in existence or has been disposed of prior to the testator’s death…

Answer 1

…then that devise is “adeemed,” and the devisee does not have an interest in the subject of the devise.

Question 2

A spendthrift clause prohibits …

If a trust does not contain a spendthrift clause …

However, the creditor is limited to reaching the …

Creditors cannot compel distributions that are___, but may reach ___.

Answer 2

… both voluntary and involuntary alienation of a beneficiary’s interest.

… a beneficiary’s creditors may reach the beneficiary’s interest by either (1) attaching present or future distributions or (2) by other means, which presumably would include the sale of the beneficiary’s interest.

… beneficiary’s interest, not the trust assets themselves.

… subject to a trustee’s discretion … amounts the trustee chooses to distribute.

Question 3

Co-trustees have some responsibility for the actions of each other. Each trustee must exercise …

If a co-trustee is held liable, the other co-trustee may seek ___ unless

Answer 3

… reasonable care to prevent and/or to compel a co-trustee to redress a serious breach of trust.

… contribution from one another … the trustee seeking contribution was substantially more at fault than another trustee or committed the breach in trust in bad faith or with reckless indifference to the purposes of the trust and/or interest of the beneficiaries.

Question 4

A trustee ___ is not personally liable.

Immunity from liability applies …

Answer 4

… properly entering into a contract in a fiduciary capacity while administering the trust …

… only if the contract discloses the fiduciary capacity and the trust.

Question 5

A trustee who contracts with a firm to manage trust assets is ___ liable for the fees levied by the firm.

Answer 5

… not personally …

However, the firm may seek payment from trust assets.

Question 6

Beneficiaries are owed duties of …

Answer 6

… loyalty, impartiality, and prudence.

Question 7

The duty of loyalty to a beneficiary is breached when …

The duty of prudence to a beneficiary is breached when … In satisfying this standard, the trustee shall …

The duty of impartiality to a beneficiary is breached when …

Answer 7

… the trustee favors its own interest.

… they act without consideration for the purposes, terms, distributional requirements, and other circumstances of the trust … exercise reasonable care, skill, and caution.

… the trust does not act impartially in investing, managing, and distributing the trust property, giving due regard to the beneficiary’s respective interests.

Question 8

The two main grounds for removal of a trustee are …

Answer 8

… (1) committing a serious breach of trust or (2) unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively.

Question 9

A […] must be executed in accordance with the same formalities as a will

Answer 9

[pour over trust]

Question 10

A […] must be executed in accordance with the same formalities as a will

Answer 10

[pour over trust]

Question 11

A trust is created when:

Answer 11

(1) the settlor has capacity to create a trust
(2) the settlor has intent to create a trust
(3) the trust has a definite beneficiary
(4) the trustee has duties to perform
(5) the same person is not the sole trustee and sole beneficiary