Trusts (5%)

Question 1

What is a trust?

Answer 1

Legal title is given to trustee

Equitable title is given to beneficiary

Question 2

Who is the settlor of a trust?

Answer 2

funds the trust with the trust property

Question 3

Who is the trustee of a trust?

Answer 3

Gains the legal title to the trust property

Question 4

Who is the beneficiary of a trust?

Answer 4

The person who holds the equitable title to the trust property

Question 5

When can a settlor be the beneficiary of a trust?

Answer 5

When there is > 1 beneficiaries

Question 6

What are the requirements for a trust creation?

3

Answer 6

1. The settlor must have an intention to create a trust (surrender legal title and give equitable title to someone else)
2. The settlor must have the necessary capacity
3. Trusts may be in writing or by oral declaration.

Question 7

A trust can be revoked or modified if?

Answer 7

Settlor retains power to revoke in N.C.

-Can revoke or modify by any reasonable means or the terms spell out process

Question 8

When can creditors go after the assets in the trust?

Answer 8

1. While the trust remains revocable, creditors of the settlor can force revocation.
2. Even at the death of the settlor, if an estate is inadequate to satisfy the claims of the creditors, the creditors can, after exhausting the probate estate, go after the corpus of the trust.

Question 9

What are testamentary trusts?

Answer 9

Trusts created in a will

Question 10

What is a pour-over will?

Answer 10

1. a trust is created during life;

2. the will of the settlor pours over their assets into the will

Question 11

What must a trust contain?

Answer 11

Property; personal or real

Question 12

What is the distinctive about a charitable trust?

2

Answer 12

1. The class is not definite — there are a group of indefinite beneficiaries
2. The purpose must be chairtable and not solely benefit a limited class

Question 13

Cy Pres Doctrine means?

Answer 13

“as near as possible”

If a trust’s charitable purpose is no longer applicable, modify the trust to be as close as possible to the original purpose.

Question 14

What happens when a pet is a beneficiary?

Answer 14

States now have statutes designating that people must protect the trust for the animal

Question 15

A support trust is one in which

Answer 15

The trustee must spend income and principal to provide beneficiary with support

-no more and no less

Question 16

A “discretionary trust” means:

Answer 16

Gives the trustee some ascertainable limitation to discretion to use of the property

• if no limitation, then trustee is the complete owner
• if there is a discretionary trust, then creditors cannot attack

Question 17

In a spendthrift trust, a trustee is instructed to?

Answer 17

not to recognize any alienation of the beneficial interest by the beneficiary

• beneficiary cannot sell their interest in the trust
• Creditors cannot attach until distribution is made

Question 18

What is a self-settled spendthrift trust?

Answer 18

When settlor creates a spend thrift trust listing himself as a beneficiary

-In N.C. you cannot create a self-settled spendthirft

Question 19

How can a trust be terminated?

3

Answer 19

1. Termination by the Terms of the Trust
2. Termination by the Settlor if power to revoke
3. Termination by Beneficiaries

Question 20

How can a trust be terminated by the beneficiaries?

Answer 20

A unanimous demand of beneficiaries to terminate
+
No material purpose of the trust remains unfilled

Question 21

What are the duties of a trustee?

Answer 21

1. duty to make property productive

2. duty of impartiality (among beneficiaries)

Question 22

What is the Prudent Investor Rule?

Answer 22

make decisions that a prudent investor would in the first place

Question 23

A trustee will typically be granted a broad range of powers including:

Answer 23

1. Power to sell
2. Power to Invest and Reinvest
3. Power to apportion benefit and principle

Question 24

A power of appointment is

created by? received by?

Answer 24

Appointing someone to act upon your behalf

Created by donor and received by donee

e.g. Power of Attorney

Question 25

If a power of appointment is given to someone, must they accept?

Answer 25

No

Question 26

Power of Attorney gives the donee

Answer 26

The power to control property that is not their own.

Question 27

A durable power of attorney is?

How to create?

Answer 27

a power of attorney that does not lapse if the donor became incapacitated or incompetent.
-Lasts until revoked or death

1. must be registered