Trusts

Question 1

testamentary trusts

Answer 1

created in a will, takes effect at death. Elements: (1) intent and capacity, (2) identifiable beneficiaries, (3) name trustee (4) trust property (5) valid trust purpose (6) delivery

Question 1

private express trust

Answer 1

clearly states intentions of settlor to transfer property to beneficiaries. Requires (1) intent, (2) trust property (3) valid trust purpose and (4) ascertainable beneficiaries

Question 2

intervivos trusts

Answer 2

created and transferred during settlors lifetime. Elements: (1) intent and capacity, (2) identifiable beneficiaries, (3) named trustee, (4) trust property, (5) valid trust purpose (6) delivery

Question 3

totten trusts

Answer 3

Bank account; Settlor is also trustee holding account for benefit of 3rd party. Takes effect at death

Question 4

honorary trusts

Answer 4

provided for animals, graves, etc.

Question 5

spendthrift thrust

Answer 5

restricts beneficiary’s power to transfer his equitable interest; creditors can’t reach assets until property has been paid out to beneficiary

• Exceptions: child support, necessities, alimony
• *Beneficiaries can’t terminate spendthrift trust

Question 6

support trust

Answer 6

trustee is specifically directed as to what amount to pay beneficiary

Question 7

discretionary trust

Answer 7

trustee has discretion to determine what amount is necessary to pay beneficiary

Question 8

constructive trust

Answer 8

remedy in which places property in trust and orders person in possession to transfer property to beneficiary

Question 9

pour over trust

Answer 9

living trust exists prior to formation of will and will contains provisions of giving assets under trust.

Elements: (1) valid trust (2) valid will (3) trust created and in existence prior to will

Question 10

secret trust

Answer 10

will provision is totally silent as to trust language however outside will there’s an agreement of trust, parol evidence does not bar introduction since evidence of prior trust is being introduced to explain provision in will

Question 11

semi-secret trust

Answer 11

will provision has some language as to trust but not complete and there’s an outside agreement of trust, some states will uphold trust

Question 12

charitable trust

Answer 12

beneficiary is public at large and purpose is for charity

Question 13

cy pres doctrine

Answer 13

if charity not in existence at time of death or property is insufficient to carry out intent of testator, courts will look at intent of testator in order to save trust. Will find “Next best thing” “Nearest to his intent

Question 14

trust amendment

Answer 14

can’t be revoked unless right is reserved. Modifications to trusts are allowed to carry out trust purpose if it doesn’t deprive beneficiaries of an interest

Question 15

purchase money resulting trust

Answer 15

similar to secret trust but involves a deed. Requires (1) valid deed, (2) consideration by settlor (3) named trustee and (4) agreement of trust outside deed

Question 16

co-trustee

Answer 16

if there are 2 trustees, majority of states require them to act with unanimity absent contrary intent express in trust agreement

Question 17

prudent investment rule

Answer 17

trustee has duty to act as a prudent investor and exercise reasonable care and skill

Question 18

duty to diversify trust

Answer 18

the trustee must adequately diversify the assets in a way that spreads the risk of loss. While risky investments are allowed (and may be desirable due to the correlation between risk and reward), whether an investment’s risk is tolerable will depend on the size and purpose of the trust.

Question 19

duty to disclose and account

Answer 19

A trustee has a duty to disclose to the beneficiaries complete and accurate information about the nature and extent of the trust property. A trustee must also periodically account for actions taken on behalf of the trust.

Question 20

duty of loyalty and impartiality

Answer 20

A trustee owes a duty of loyalty to all the beneficiaries. She must balance the interests of the present and future beneficiaries by investing the property so that it produces a reasonable income while preserving the principal for the remaindermen.

Question 21

trustee powers

Answer 21

trustees can only act pursuant to express powers given to them in trust document

Question 22

termination of trust

Answer 22

• Trustee has no power to terminate trust unless provided otherwise or purpose accomplished
• Settlor may terminate if power is reserved
• Operation of law may terminate
• Beneficiaries may terminate if all agree

Question 23

duties of trustee

Answer 23

duty of care, duty of loyalty, duty to separate, duty to defend

Question 24

revival statutes

Answer 24

some jxs have revival statutes whereby prior will is revived and probated if testators intent to revive is expressed in writing and contained on face of will

Question 25

simultaneous deaths

Answer 25

if title to property depends on priority and cant be established by clear evidence that one spouse survived, property will be treated as if one spouse survived the other. It’s deemed that a person fails to survive other if it doesn’t survive other by 120 hours

Question 26

dependent relative revocation

Answer 26

testator who revokes will under mistaken belief has not effectively revoked will and will is revived

Question 27

per capita distribution (default)

Answer 27

distribution starts on first line where there's at least 1 alive

Question 28

per strikes distribution

Answer 28

must state "per stripes". distribution starts at first line of heirs regardless of whether they're alive or dead.

Question 29

power to revoke

Answer 29

Under the majority rule and the Uniform Trust Code ("UTC"), a trust is presumed to be revocable unless it expressly states otherwise. However, a minority of states presume a trust is irrevocable unless the trust states otherwise.

Question 30

Lack of Trustee

Answer 30

A designated trustee may decline trusteeship. If this occurs, the trust does not fail. Instead, the court will appoint a successor trustee unless the settlor expressed intent that the trust should only continue if a certain person served as trustee.

Question 31

self-dealing

Answer 31

Under this duty, a trustee is generally prohibited from engaging in self-dealing by buying or selling trust assets because it causes a conflict of interest between the trustee's duties to the beneficiaries and the trustee's own personal interest. Self-dealing raises an irrebuttable presumption that the trustee breached the duty of loyalty.

Question 32

suit for damages

Answer 32

Beneficiaries of a trust may sue the trustee for damages for lost profits, lost interests, and other losses resulting from a breach of trust.

Question 33

removal of trustee

Answer 33

If a trustee commits a breach of duty, the beneficiaries may seek to remove the trustee. A trust will not fail for a lack of trustee; the court will simply appoint a new one.