Trusts

Question 1

Perpetual trusts allow for a tax exemption through a loophole in the generation

Answer 1

skipping transfer law

Question 2

Revocable trusts, unlike wills, do not go through

Answer 2

probate

Question 3

Revocable trusts is a

Answer 3

will substitute

Question 4

What a revocable trust does as a will substitute

3

Answer 4

• Avoid probate - if funded
• maintains privacy
• structures stewardship/distributions during incapacity

Question 5

if settlor has complete control and access then the instrument is

Answer 5

fully revocable

Question 6

Mandatory notice to presumptive remainder beneficiaries

Answer 6

likely no mandatory notice to presemptive remainder beneficiaries

Question 7

If the property still belongs to client (settlor) the trust is not being used for
and is being used for

Answer 7

Not used for
- - tax benefits
- creditor protection
Used for
- avoid probate, maintain privacy and have a different structure in place for incapacity

Question 8

Do you still need a will if you have a trust

Answer 8

• yes because not listing every piece of property/assets
• but for privacy, the will should say that everything in the will pours over for a revocable trust
• called pour-over will

Question 9

With spouses a revocable trust is funded when

Answer 9

1st spouse dies, it puts it in the 2nd spouses revocable trust

Question 10

At death the revocable trust becomes a

Answer 10

irrevocable trust
- ask does the assets go outright or in further trust to the beneficiaries

Question 11

After passing should assets remain in further trust for beneficaries?

what that does

Answer 11

• maintain a degress of control over distributions
• stewardship and management
• creditor protection
• built in estate planning for beneficaries (control remainder after primary beneficaries passing, powers appointed for flexability)

Question 12

Can leave assets in further trust (irrevocable trust) through

Answer 12

will and revocable trust

Question 13

If not leaving assets in a revocable trust in further trust, would just be using the revocable trust for

Answer 13

privacy reasons

Question 14

2 types of irrevocable trusts

Answer 14

1. testamentary- created by will or irrevocable trust
2. inter vivos- given during life

Question 15

inter vivos trust

Answer 15

• created to accomplish advanced planning goals and wealth transfer tax planning purposes

Question 16

Assets transfered to irrevocable trust are outside

Answer 16

taxable estate

Question 17

Irrevocable trust planning may be appropriate when planning for goverment benefits

Answer 17

medicate, special needs social security

Question 18

With trust descendant can decide

Answer 18

what the money is used for and what happens to the money if it wasn’t used

Question 19

Dynasty trust

Answer 19

Under article 1 goes through making new trusts for each generation

Question 20

Power of appointment

Answer 20

giving someone power to decide where assets go
(ex. give trust to spouse, give spouse options of who to leave the spouse’s trust to upon the spouses death)

Question 21

Remote contingency article of a trust

Answer 21

no beneficiarys at death or later, then what should happen to the money

Question 22

With a dynastic trust structure, you want to

Answer 22

leave soemthing there for the future trustee

Question 23

Dynastic trust structure
A big purchase is ok if

Answer 23

the trust says so

Question 24

3 different types of beneficiaries

Answer 24

1. concurrent
2. future
3. remainder

Question 25

# UTC 705 Resignation of trustee A trustee may resign:

Answer 25

1. upon at least 30 days notice to the qualified beneficiaries, the settlor, if living, and all cotrustees, or 2. with approval of the court

Question 26

# UTC 705 Resignation of trustee In approving a resignation

Answer 26

the court may issue orders AND impose conditions reasonably necessary for the protextion of trust property

Question 27

# UTC 705 Resignation of trustee Any liability of a resigning trustee or of any surities on the trustee's bond for acts or ommission of the trustee is not

Answer 27

discharged or affected by the trustees resignation

Question 28

# UTC 705 Resignation of trustee To resign, the

Answer 28

beneficaries and the living settlor must agree

Question 29

# UTC 705 Resignation of trustee If the beneficiaries and the living settlor do not agree the trustee needs a

Answer 29

court order to resign

Question 30

One of the ways beneficiaries can modify irrevocable trusts is through the

Answer 30

removal of a named trustee

Question 31

Trustee removal and replacement does have the practical impact of

Answer 31

modifying the trust by installing a new trustee

Question 32

Beneficiaries routinely remove trustees for

Answer 32

mundane reasons ex. expense, convience, or location

Question 33

# UTC 706 Removal of Trustee who may remove a trustee

Answer 33

1. teh settlor, a cotrustee, or a beneficiary may request the court to remove a trustee OR 2. a trustee may be removed by the court on its own inititive

Question 34

# UTC 706 Removal of Trustee The court may remove a trustee if:

Answer 34

1. The trustee has committed a serious breach of trust 2. lack of cooperation among cotrustees substantially impairs the administration of the trust 3. because of unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the interests of the beneficiaries; OR 4. There has been a substantial change of circumstances OR 5. Removal is requested by all of the qualified beneficiaries, the court finds that removal of the trustee best serves the interests of the beneficiaries and is not incosistant with a material purpose of the trust and a suitable cotrustee or successor trustee is available

Question 35

# Removal of the trustee A well drafted trust will have braod

Answer 35

removal and replacement provisions to make litigation uneccessary

Question 36

Excessive fees are an important reason why

Answer 36

beneficaries seek to remove trustees

Question 37

A trustee who is removed in order to lower fees for the trust does not have

Answer 37

standing to pursue an appeal

Question 38

Can a settlor exculpate a trustee from breaches by inserting express terms to that effect in that trust instrument

Answer 38

The UTC allows for trustee exculpation with limits

Question 39

# UTC 1008 Exculpation of Trustee A term of a trust relieving a trustee of liability for breach of trust is unenforcable to the extent that it:

Answer 39

1. relieves the trustee of liability for breach of trust commited in bad faith OR w/ reckless indifference to the purposes of the trust OR the interests of the beneficiaries OR 2. was inserted as the result of an abuse by the trustee of a fiduciary OR confidential relationship to the settlor

Question 40

# UTC 1008 Exculpation of Trustee An exculpatory term drafted OR caused to be drafted by the trustee is an

Answer 40

abuse of a fiduciary OR confidential relationship UNLESS the trustee proves that the exculpatory term is fair under the circumstances AND that its existance and contents were adequately communicated to the settlor

Question 41

# UTC 1008 Exculpation of Trustee An exculpatory clause is unenforcable if

Answer 41

it relieves the trustee of liability for bad faith or reckless indifference

Question 42

A trustee may accept or resign from position by methods under

Answer 42

UTC or in trust instrument

Question 43

Once the trustee accepts the position, the trustee must

Answer 43

act, or refrain from acting consistant with the terms of the trust instrument AND the fiduciary duties

Question 44

Trust may modify and/or expand upon

Answer 44

duties ex. trust with exculpatory clauses releases trustees from liability for breaches of duty that fall short of bad faith or recklessness

Question 45

revocable trusts that terminate on the death of the settlor are commonly used as

Answer 45

will substitutes

Question 46

Whether: - a trust is irrevocable from moment of creation or - becomes irrevocable at the death of the settlor are a

Answer 46

planning device for high wealth families because of the asset protection and privacy they provide