Trusts 4/ trust modification

Question 1

A discretionary trust is not used when assigning claims in a

Answer 1

divorce (when dividing the mental estate)

Question 2

Under HEMS if needed money for credit cards or a wedding

Answer 2

would prolly give the money

Question 3

When a trust has best interests and HEMS in the trust

Answer 3

can have a trustee for each

Question 4

A cotrustee when they are given different powers in the trust is not

Answer 4

liable for the other trustee actions

Question 5

Material Purpose Doctrine

Answer 5

An active trust may not be terminated, even with the consent of all the beneficaries, if a material purpose of the settlor remains to be accomplished

Question 6

How courts figure out material purpose

Answer 6

look at the words of the trust

Question 7

6 Motivations for trust modifications

Answer 7

1. modernizing distribution standards
2. revising trustee succession
3. adding directed trust provisions
4. removing investment provisions
5. granting powers of appointomwnt
6. combining multiple trusts

Question 8

Judicial modification

Answer 8

• petition to change filed to court requesting changes
• requires notice to all beneficiaries and disclosure of the trust

Question 9

trust modification

Non-judicial settlemet agreement

Answer 9

• trustee and beneficiaries agree to modify certain provisions of the trust
• generally used to resolve issues of the trust administration

Question 10

Modification by consent

Answer 10

settlor, trustee, and beneficaries agree to modify the trust

Question 11

trust modification

Fiduciary restructuring

Answer 11

If the trust allows the grantor to replace trustees, then the grantor can reformat all fiduciary roles to create either a traditional directed trust structure or bifuracuate trustee duties among seperate trustees

Question 12

The material purpose doctrine prevents a court from

Answer 12

modifying an irrevocable trust unless all the beneficiaries consent and all the settlors material purpose has been satisfied

Question 13

Over time, courts have determined that certain trust conditions are, in and of themselves, a material purpose. For example, 4 limitations have traditionally prohibited a trusts early termination

Answer 13

1. a spendthrift trust
2. discretionary distribution terms
3. language indicating that the trust is for the beneficiaries continued support, or
4. age requirements

Question 14

trust modification

Equitable or administrative deviation

Answer 14

allows for modification based on changed circumstances

Question 15

UTC 412 Mod or term bc of unantic cric or inabl to admins trust effectiv

THe court may modify the adminstrative or depositive terms of a trust if,

Answer 15

because of circumstances not anticipated by the settlor, modification or termination will further the purposes of the trust. To the extent practiable, the modification must be made

Question 16

UTC 412 Mod or term bc of unantic cric or inabl to admins trust effectiv

The court may modifiy the administrative terms of a trust if continuation of the trust on its existing terms would be

Answer 16

impracticable or wasteful or impair the trusts administration

Question 17

UTC 412 Mod or term bc of unantic cric or inabl to admins trust effectiv

Upon termination of a trust under this section the trustee shall

Answer 17

distribute the trust property in a manner consistent with the purposes of the trust

Question 18

UTC 414 Modification or termination of uneconomic trust

After notice to the qualified beneficiaries

Answer 18

the trustee of a trust consisting of trust property having a total value less then (50k) may terminate the trust if the trusteee concludes that the value of the trust property is insufficient to justify the cost of administration

Question 19

UTC 414 Modification or termination of uneconomic trust

THe court may modify or terminate the trust or remove the trustee and appoint a different trustee if it determines that the

Answer 19

value of the trust property is insufficent to justify the cost of adminstration

Question 20

UTC 414 Modification or termination of uneconomic trust

Upon termination of a trust under this section, the trustee shall

Answer 20

distribute the trust property in a manner consistant with the purposes of the trust

Question 21

UTC 415 Reformation to correct a mistake

The court may reform the terms of the trust, even if unambiguous, to conform the terms to the settlors intention if it is proved by cleat and convincing evidence

Answer 21

what the settlors intention was and that the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement

Question 22

UTC 416 Modification to achieve settlots tax objections

To achieve the settlors tac objectives, the court may modify the terms of the trust in a manner

Answer 22

That is not contrary to the settlors probable intention, the court may provide that the modification has a retroactive effect

Question 23

Trust decanting involves

Answer 23

a trustee pouring “decanting” assets from one trust into another

Question 24

When a trustee can take advantage of an exemption in the Generation Skipping Tax

Answer 24

If trustee can extend the suration of trsts created before a certain date

Question 25

A power of appointment is

Answer 25

the power given by the property owner to another to choose within certain limits prescribed by the property owner who will recieve certain property in the future

Question 26

General power of apointment

Answer 26

a power exercisable in favor of the power, the power holders creditor, the power holders estate, or the creditors of the power holders estate

Question 27

A power is presently exercsiable if

Answer 27

the power holder can currently create an interest, present or future, in a object of the power

Question 28

A power of appointment is not presently exercisable if

Answer 28

exercisable only by the power holders will ot if its exercise is not effective for a specified period of time or until occurance of some event

Question 29

Powers of appointment can be held in what capacities

Answer 29

fiduciary or nonfiduciary

Question 30

pwrs of apptment

The defininition of beneficiary excludes the

Answer 30

powers held by a trustee but not powers held by other in a fiduciary capacity

Question 31

How to exercise a power of appointment

3

Answer 31

1. a donee must manifest an intent to exercise the power
2. the manner of expression must satisfy any formal requirements imposed by the doner
3. the appointment must be a permissible exercise of power

Question 32

uPC 608 Exercise of power of appointment

In the absense of a requirement that a power of appoitment be exercised by a refrence, or by an express or specific refrence, to the powerm a general residuary clause in a will, or a will making general disposition of all of the testators property, expresses an intention to exercise a power of appointment held by the testator only if:

Answer 32

1. the power is a general power and the creating instrument does not contain a gift if the power is not exercised OR
2. the testators will manifests an intention to include the property subject to the power

Question 33

UPC 704 Power of apptment, meaning of specific refrence requirement

If a governing instrument creating a power of appointment expressly req that the power be exercised by a refrence, an express refrence, or a specific refrence, to the power or its source, it is presumed that

Answer 33

the doner’s intention, in requiring that the donee exercise the power by making refrence to the particular power or to the creating instrument, was to prevent an nadvertent exercise of the power

Question 34

Trust modification can happen in three ways

Answer 34

1. material purpose doctrine (claflin)
2. deviation
3. decanting

Question 35

The material purpose doctrine (claflin) allows for change as long as

Answer 35

the proposed modification is in line with the material purpose of the trsut

Question 36

Deviation allows modification based on

Answer 36

changed circumstances

Question 37

With bothe the material purpose doctrine and deviation, the trustee must

Answer 37

file a petition for modification and recieve judicial approval

Question 38

Beneficiaries may request trustee removal and replacement for

Answer 38

1. Cause
2. if the proposed change benefits and trust is not inconsistent with the trusts material purpose

Question 39

What deviation provides that cy pres does not is the factor of

Answer 39

unanticipated circumstances

Question 40

Deviation

Trustees can petition for modification if

Answer 40

changes in circumstances render the fulfilment of trust terms difficult or impossible ( the fiduciary duty may demand that a trustee file such a petition)

Question 41

If a trustee of a private trust mismanages the trust funds or fails ro distribute them property, the beneficiaries can

Answer 41

bring a claim and hold the trustee financially accountable

Question 42

Red flags, for if trust is illegal

Answer 42

discrimination
restiction on marriage
restriction on religion
illegal activites