Trusts and Future Interests Flashcards
What is a support trust?
One in which the trustee is required to pay or apply so much of the trust as is necessary for the support of the beneficiary. The trustee does not have discretion to refuse to pay bills necessary for the beneficiary’s support.
What is a discretionary trust?
The trustee is given discretion whether to apply or withhold payment of trust property to the beneficiary. This discretion limits the rights of the beneficiary to the amounts the trustee decides to give her. The beneficiary cannot interfere with the exercise of the trustee’s discretion unless the trustee abuses her power.
What is the trustee’s duty of loyalty?
It extends to all beneficiaries equally.
When can a trust be terminated by its beneficiaries?
Only when all of the beneficiaries consent and the modification will not interfere with a material purpose of the trust.
What is a spendthrift provision and what is it’s effect?
A spendthrift trust is one in which the beneficiary is unable voluntarily or involuntarily to transfer his interest in the trust. The beneficiary can’t sell or give away his rights to future income or capital, and his creditors generally can’t collect or attach rights to the trust. (Exception to this is when the settlor is the beneficiary of the trust – then creditors can get to it.)
It also precludes termination of a trust because it shows the settlor’s purpose and manifests his lack of confidence in the judgment and management ability of the beneficiary. Only the settlor can waive this.
When can a court terminate a trust prior to the time fixed in the instrument?
When the trust purposes are accomplished early or the trust purposes become illegal or impossible to carry out.
How is a valid trust created?
There must be a settlor who, intending to create a trust for a valid trust purpose, delivers the trust property to the trustee to hold for the benefit of one or more beneficiaries.
If there are no trust assets when the trust instrument is executed, a trust arises in the future only if, when the assets come into existence, the settlor manifests a new intention to create the trust. (But that’s not required if the promise is supported by valid consideration.)
How do you create a valid pour-over gift?
Under the traditional view, to create a valid pour-over gift from a will to a revocable trust, the trust must be in existence or must be executed at the time of the will’s execution.
Under the majority view, a will may devise property to a trustee of a trust established or to be established during the testator’s lifetime. Additionally, pour-over gifts are valid even if the trust is unfunded during the T’s lifetime, and even if the trust is amended prior to the T’s death.
