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Wills & Trusts > Trusts > Flashcards

Trusts Flashcards

1
Q

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

A

skipping transfer law

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2
Q

Revocable trusts, unlike wills, do not go through

A

probate

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3
Q

Revocable trusts is a

A

will substitute

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4
Q

What a revocable trust does as a will substitute

3

A
  • Avoid probate - if funded
  • maintains privacy
  • structures stewardship/distributions during incapacity
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5
Q

if settlor has complete control and access then the instrument is

A

fully revocable

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6
Q

Mandatory notice to presumptive remainder beneficiaries

A

likely no mandatory notice to presemptive remainder beneficiaries

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7
Q

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

A

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

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8
Q

Do you still need a will if you have a trust

A
  • 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
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9
Q

With spouses a revocable trust is funded when

A

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

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10
Q

At death the revocable trust becomes a

A

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

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11
Q

After passing should assets remain in further trust for beneficaries?

what that does

A
  • 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)
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12
Q

Can leave assets in further trust (irrevocable trust) through

A

will and revocable trust

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13
Q

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

A

privacy reasons

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14
Q

2 types of irrevocable trusts

A
  1. testamentary- created by will or irrevocable trust
  2. inter vivos- given during life
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15
Q

inter vivos trust

A
  • created to accomplish advanced planning goals and wealth transfer tax planning purposes
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16
Q

Assets transfered to irrevocable trust are outside

A

taxable estate

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17
Q

Irrevocable trust planning may be appropriate when planning for goverment benefits

A

medicate, special needs social security

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18
Q

With trust descendant can decide

A

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

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19
Q

Dynasty trust

A

Under article 1 goes through making new trusts for each generation

20
Q

Power of appointment

A

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)

21
Q

Remote contingency article of a trust

A

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

22
Q

With a dynastic trust structure, you want to

A

leave soemthing there for the future trustee

23
Q

Dynastic trust structure
A big purchase is ok if

A

the trust says so

24
Q

3 different types of beneficiaries

A
  1. concurrent
  2. future
  3. remainder
25
Q

UTC 705 Resignation of trustee

A trustee may resign:

A
  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
26
Q

UTC 705 Resignation of trustee

In approving a resignation

A

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

27
Q

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

A

discharged or affected by the trustees resignation

28
Q

UTC 705 Resignation of trustee

To resign, the

A

beneficaries and the living settlor must agree

29
Q

UTC 705 Resignation of trustee

If the beneficiaries and the living settlor do not agree the trustee needs a

A

court order to resign

30
Q

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

A

removal of a named trustee

31
Q

Trustee removal and replacement does have the practical impact of

A

modifying the trust by installing a new trustee

32
Q

Beneficiaries routinely remove trustees for

A

mundane reasons
ex. expense, convience, or location

33
Q

UTC 706 Removal of Trustee

who may remove a trustee

A
  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
34
Q

UTC 706 Removal of Trustee

The court may remove a trustee if:

A
  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
35
Q

Removal of the trustee

A well drafted trust will have braod

A

removal and replacement provisions to make litigation uneccessary

36
Q

Excessive fees are an important reason why

A

beneficaries seek to remove trustees

37
Q

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

A

standing to pursue an appeal

38
Q

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

A

The UTC allows for trustee exculpation with limits

39
Q

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:

A
  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
40
Q

UTC 1008 Exculpation of Trustee

An exculpatory term drafted OR caused to be drafted by the trustee is an

A

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

41
Q

UTC 1008 Exculpation of Trustee

An exculpatory clause is unenforcable if

A

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

42
Q

A trustee may accept or resign from position by methods under

A

UTC or in trust instrument

43
Q

Once the trustee accepts the position, the trustee must

A

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

44
Q

Trust may modify and/or expand upon

A

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

45
Q

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

A

will substitutes

46
Q

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

A

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

Wills & Trusts (26 decks)

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