Trusts

Question 1

What is a trust

Answer 1

A fiduciary relationship wherein one (trustee) is given legal title/interest by the
creator (settlor) to hold and protect the property for the benefit of another (beneficiary) who takes the
equitable title/interest and therefore possesses the power to enforce the trust

Question 2

Express trusts

Answer 2

Private or charitable

Question 3

Implied trusts

Answer 3

resulting or constructive

Question 4

What is the UTC and applicability

Answer 4

Uniform Trust Code, adopted in a majority of states

Question 5

UTC v. Traditional rule re: revocability

Answer 5

Under UTC: trusts are presumed to be revocable
Under traditional rule: trusts are presumed to be irrevocable

Question 6

Settlor

Answer 6

creator of the trust

Question 7

Trustee

Answer 7

must have capacity to acquire and hold property and administer the trust

Question 8

Intent

Answer 8

• Settlor must intend to make a gift in trust, using words like “for the benefit of”
• Must be present intent to create the trust

Question 9

Valid trust purpose

Answer 9

cannot be illegal or against public policy, must be possible to achieve

Question 10

Inter Vivos (living trust)

Answer 10

lifetime transfers in trust

Question 11

Pour over gift from will

Answer 11

will directs property to be distributed to a trust upon the happening
of an event; allows probate to be avoided because it is funded by the will

Question 12

Requirements for pour-over gift from will

Answer 12

• trust must be in writing and identified in the will
• trust may be revocable but if it is revoked, the pour-over provision fails

Question 13

Testamentary trust

Answer 13

• created according to the terms of a will; funded independently of the will

Question 14

Three kinds of testamentary trusts

Answer 14

• In the terms of the will
• Incorporation by reference
• Secret trust

Question 15

Secret trust

Answer 15

• what appears to be an outright gift in a will is actually based upon a promise by the devisee (trustee) to the testator (settlor) to hold the property for another’s
  benefit

Question 16

Secret trust: burden of proof and remedy

Answer 16

• Clear and convincing evidence
• Constructive trust to avoid unjust enrichment to the secret trustee

Question 17

Semi-secret trust

Answer 17

a will directs a gift be held in trust without naming a beneficiary

Question 18

Semi-secret trust, common law

Answer 18

Gift fails because extrinsic evidence is prevented to prove the trust

Question 19

Semi-secret trust: remedy

Answer 19

• resulting trust in favor of the testator’s heirs
• modern trend: would impose
  a constructive trust in favor of the intended beneficiary, if known

Question 20

Charitable trust

Answer 20

a trust created for a charitable purpose benefiting the community

Question 21

Charitable purpose: elements

Answer 21

• Charitable purpose
• Large class of unidentifiable beneficiaries

Question 22

Examples of charitable purposes

Answer 22

advancement of health, education
religion, government, relief of
poverty, or other purpose benefiting the community at large or a particular segment

Question 23

RAP re: charitable trusts v. other trusts

Answer 23

Does not apply to charitable trusts but to other trusts

Question 24

Cy Pres Doctrine

Answer 24

• Allows the court to modify the terms of a charitable trust when it cannot be performed as
  written, so long as consistent with settlor’s intent; UTC allows even if intent unknown
• court will seek a similar charitable purpose if the original purpose becomes illegal,
  impracticable or impossible to perform

Question 25

Honorary trust

Answer 25

one without a charitable purpose and without a definite human
beneficiary to enforce the trust (e.g., to care for a pet or tend to a grave)

Question 26

Income beneficiaries

Answer 26

Receive income from the trust

Question 27

Remainder beneficiaries

Answer 27

entitled to the trust principal upon termination of the trust

Question 28

Court’s treatment of charitable trust with specific intent v. general intent

Answer 28

Specific intent? –> Court may not modify the trust, it will be terminated and become a resulting trust

General intent? –> court will substitute a similar charity

Question 29

Resulting trust

Answer 29

trust fails in some way so the holder of the property is required to return it to the settlor or the settlor’s estate

Question 30

General principal re: beneficiary’s creditors

Answer 30

A beneficiary’s creditor’s may reach trust principal or income only when those amounts become payable to the beneficiary or are subject to their demand

Question 31

Alienation re: trusts

Answer 31

A beneficiary’s equitable interest in trust property is freely alienable, it can be sold or used for collateral for a loan unless limited by statute or trust instrument