Trusts

Question 1

Valid trust

Answer 1

Settlor: creator, must have capacity
Intent
Trustee: holds legal title, courts will appoint if not named
Ascertainable beneficary: holds equitable title
Assets: the res, cash, securities, property, etc.

Question 2

Inter vivos trust

Answer 2

an inter vivos trust is created while the trustor is still living. The trustee can designate himself as a trustee
requires delivery if third party trustee

Question 3

Testamentary trust

Answer 3

a testamentary trust is created in a will or document incorporated into a will. the will must satisfy the requirements of an attested or holographic will

Question 4

Trust purpose

Answer 4

Can be created for any purpose as long as it is not illegal or contrary to public policy. Alternative terms will be honored, and if none, then offending terms stricken

Question 5

Omitted children

Answer 5

a child who is unintentionally omitted from the trust can force an intestate share if the child was born/adopted after trust created, or settlor didn’t know about the child
exceptions: otherwise provided for, or had other children and left the estate to the omitted child’s parent

Question 6

Merger of Trust

Answer 6

If the same person is both the sole trustee and sole beneficiary, the trust will terminate

Question 7

Declaration of trust

Answer 7

type of inter vivos trust where settlor names self as trustee, collects income during life and property goes to beneficiaries at death; if propery is real property, must be in writing

Question 8

Deed of trust

Answer 8

Settlor creates a trust, is not the trustee, and the deed is delivered and property is transfered to Trustee; must always be in writing

Question 9

Revocability

Answer 9

trusts are presumed to be revocable
Settlor may amend or revoke according tot rust terms, of by manidesting clear/convincing evidence of intent
if there are multiple settlors, ability of one to revokeamend turns on whether trust contains community proeprty

Question 10

Pour over gift

Answer 10

a will directs property to be distributed to a trust; allows probate to be avoided
trust must be in writing and identified
ma be recovable trust, but if revoked, the pour over provision fails

Question 11

Secret Trust

Answer 11

occurs when what appears to be an outright gift in a will is actualed based on a promise by the devisee/trustee to the testator/settlor to hold the property for another’s benefit
must be proven by clear and convincing evidence
remedy is constructive trust

Question 12

Semi secret trust

Answer 12

a will directs a gift to be held in trust without naming a beneficiary
at common law, gift fails
remedy: resulting trust in favor of T’s heirs, modern trend is constructive trust in favor of intended beneficiary

Question 13

Totten trust

Answer 13

bank account in depositor’s name as trustee for named beneficiary

Question 14

Charitable trust

Answer 14

created for charitable prupose to benefit community
elements: charitable purpose and large class of unidentifiable beneficiaries
Not subject to RAP

Question 15

Cy Pres

Answer 15

applies with charitable trusts
allows court to modify terms of a charitable trust when it cannot be performed as written, so long as it is consistent with settlor’s intent
Will seek a similar charitable purpse

Question 16

Honorary Trust

Answer 16

without charitable purpose and without definte human beneficiary
meant to care for a pet, or tend to a grave
terminates on death of last surviving animal
others: typically limited by statute or RAP

Question 17

Resulting Trust

Answer 17

when a trust fails, court creates a resulting trust requiring the holder of property to return it to the settlor or his estate

Question 18

Constructive Trust

Answer 18

imposed when court concludes that person holding title to property would profit by a wrong or be unjustly enriched; wrongful conduct is required

Question 19

Alienation of trust interest

Answer 19

a beneficiary’s equitable interest is freely alienable unless a statute or trust instrument limits it.
Once property is distributed to beneficiary, no restraints on alienation at all

Question 20

Support trust

Answer 20

directs a trustee to pay income or principal as necessary to support the trust beneficiary and maintain their lifestyle. creditors cannot access assets unless providing a necessity to the beneficiary

Question 21

Discretionary trust

Answer 21

trustee has complete discretion regarding whether or not to apply payments to beneficiary. Creditors have same rights as beneficiary if trustee decides to pay

Question 22

Mandatory trust

Answer 22

trustee has no discretion, must distribute in accordance with the trust

Question 23

Spendthrift trust

Answer 23

expressly restricts beneficiary’s power to voluntarily or involuntarily transfer interest;
creditors can generally not reach trust interest until paid out to beneficiary
exceptions: child/spousal support and basic necessities

Question 24

Terminating Non charitable Irrevocable trust

Answer 24

by all beneficiaries if no material purpose violation
all beneficiaries and settlor: even if there is a material purpose violation
must distribute as directed by trust or settlor

Question 25

Unfufilled Material Purpose

Answer 25

if settlro dies and all beneficiaries agree to terminate, the trustee can block termination if contrary to a material trust purpose

Question 26

Resignation of Trustee

Answer 26

a trustee can resign on 30 days notice to beneficiaries, settlor (if living) and other co- trustees.
Or can get court approval

Question 27

Removal of trustee

Answer 27

Unless trust provides otherwise, neither S nor B can get rid of T
court can remove T if incapable or materially breaches a duty, conflict of interest, or poor performance

Question 28

Principal and Income allocations

Answer 28

common law: income to lifetime beneficiary, principal to remainder holder
Modern: focus on total return, may recharacterize to fulfill trust purposes so long as fair and reasonable

Question 29

Lapse and Anti Lapse

Answer 29

apply to trusts, anti lapse protects relatives if they have issue

Question 30

Trustee Duty of Care

Answer 30

duty to follow trust directions
duty to act as reasonably prudent person
duty to act as a prudent investor (look at overall portfolio)
duty to make property productive
duty to diversify
duty to be impartial
Duty of Good faith
[DRIP DIG]

Question 31

Duty of loyalty

Answer 31

No self dealing
No further inquiry unless otherwise specified in trust terms, but still must be fair/reasonable
if conflict of interest, T must act in good faith

Question 32

Delegation of trustee

Answer 32

okay to delegate, but T must oversee decision making

Question 33

Remedies for trustee breach of duty

Answer 33

Removal
Damages for lost profits
Ratify
Tracing
T may be personally liable to third party
A co-trustee is liable unless no knowledge and could not have prevented