Trusts and Future Interests Flashcards

1
Q

Who can be a beneficiary of a trust?

A

Natural persons, corporations, or organizations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

A trustee cannot be…

A

The sole trustee and the sole beneficiary.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the valid charitable purposes?

A
  • Combat poverty
  • Education or religion
  • Public health
  • Government/municipal benefit
  • Other charitable purposes
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is a resulting trust?

A

Implied by law if trust fails for lack of beneficiary. All trust property returns to settlor’s estate.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is a discretionary trust?

A

Trustee has absolute discretion and power to determine when and how much of trust property is distributed to beneficiaries.

Must be in good faith; court interferes only if abuse of power.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How do trust assets pass?

A

According to terms of trust.

If testamentary trust/distribution fails, property passes:
- under residuary clause in will; OR
- to settlor’s heirs by intestacy (if no residuary clause).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the minority view on modification of a trust?

A

Settlor free to amend or revoke unless trust states otherwise.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the equitable deviation doctrine? What is the UTC version?

A

Generally: court may modify terms of trust if
- continuing is impractical or wasteful; AND
- mod furthers trust purpose because of unanticipated circumstances.

UTC: dispositive provisions may be modified when circumstances arise that were not anticipated by settlor.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is an additions clause?

A

Gives trustee specific power to accept/reject additions to trust property from settlor or anyone else.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How is trust property distributed on termination of the trust?

A

Trustee must proceed expeditiously to distribute.

May retain reasonable reserve to pay trust debts, expenses, and taxes.

Beneficiaries may decide how distributed if trust terminated by:
- consent of settlor and beneficiaries; OR
- beneficiaries consent and court determines continuance not necessary to achieve trust purpose.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Duty to administer trust: common law

A

Trustee owes beneficiaries duty to act with care, skill, and prudence.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Duty of Care: Prudent Administration

A

Must administer as reasonable person would: exercise reasonable care, skill, and caution.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Duty of Care: Take Control and Protect Trust Property

A

Must take reasonable steps to take control and protect trust property, such as obtain fire/casualty insurance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Duty of Loyalty: Conflict of Interest

A

Transaction presumed affected by CoI if entered into by trustee’s
- spouse, descendants, siblings, parents, or their spouses;
- agent or attorney; OR
- entity in which trustee has interest that might affect best judgment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Duty of Loyalty: Act Impartially

A

Must act impartially when investing, managing, and distributing trust property, giving due regard to beneficiaries’ respective interests.

Cannot by influenced by personal favoritism or animosity.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Liability for acting in accordance with settlor’s wishes

A

Revocable trust: duty to settlor only; no liability for acting in accordance with wishes

Irrevocable trust: duty to settlor and beneficiaries; liable for acting in accordance if to exclusion of beneficiaries

17
Q

Representation of Remainderman

A

For purposes of future interests, minor, incapacitated, or unborn person may be represented by person with substantially identical interests. unless
- already represented; OR
- CoI exists.

18
Q

Vested Interests: Condition on Survivorship

A

Common law: not implied

UPC: implied

19
Q

Finding Intent within Blanket Exercise Clause

A

Most states: intent to exercise power is assumed

Some states and UPC: if donor required power of appointment to be exercised by express/specific reference, blanket exercise clause insufficient to show intent.

20
Q

Ineffective Appointments

A

Appointments to non-authorized persons/groups deemed ineffective.

If 2+ appointments made, ineffective one will not affect other valid appointments.

Ineffective appointments pass to taker-in-default; if not designated by donor, property passes to donee or donee’s estate.