Trusts Bar Exam

Question 1

Trust

Answer 1

management device for holding a managing property

Question 2

Principal

Answer 2

original trust property and any increased value

Question 3

Income

Answer 3

money generated by investing the trust property

Question 4

Revocable Trust

Answer 4

A revocable trust can be revoked (i.e., ended) anytime during the settlors life

Presumption for revocable

Question 5

Irrevocable trust

Answer 5

Cannot be revoked by settlor

Question 6

Mandatory Trust

Answer 6

trustee must distribute payments from trust, no discretion

Question 7

Discretionary Trust

Answer 7

Trustee given power to distribute payments at her discretion

Question 8

Remedial Trust

Answer 8

Not really a trust, it is an equitable remedy by operation of law. It is called a passive trust.

Question 9

Dynasty Trust

Answer 9

Trust that continue for 100 years or longer. Avoids taxes and RAP.

Question 10

RAP

Answer 10

Future interests are trust components so trusts are subject to RAP

Question 11

Settlor

Answer 11

person who creates trust. Courts enforce trust on basis of settlor intent

Question 12

Trustee

Answer 12

Responsible for managing the trust. Holds legal title, giving power to manage, sell/transfer or invest. May be individual or bank or company.

Question 13

Beneficiary

Answer 13

person who receives benefit. Holds equitable title and has power to enforce the trust.

Question 14

Merger

Answer 14

• An individual cannot serve as sole trustee and sole beneficiary of the trust.
• The Doctrine of Merger will terminate a trust if the trustee is the sole beneficiary. The person
takes title as fee simple owner of the property that was to be held in trust.

Exam Tip: If you get a problem with multiple beneficiaries, this is a good
opportunity to define merger and explain that it doesn’t apply to the facts
of the problem.

Question 15

Private Express Trust

Answer 15

1. Intent to make gift. Presumed by trust words. Precatory language (wishes) not enough. Must be able to identify who has beneficial interest, need bifurcation of title.
2. Trust Res - cannot exist without some piece of trust property. Need some fractional or future interests. Pour-over trust is the exception.
3. Trust Purpose - easy to meet, just need to not be illegal or against public policy. If term violates, strike it. If that strike causes fail, it will fail entire trust.
4. Beneficiaries - must have ascertained beneficiaries. EXCEPT unborn children, class gifts, charitable trusts

Question 16

Oral Trust

Answer 16

Valid. Only for personal property. Trustee cannot be settlor or beneficiary. CANNOT be used for pour over trusts (will).

Question 17

Charitable Trust

Answer 17

Must have charitable purpose. Such as:

• relief poverty
• education or religion
• promotion of good health
• government or municipal purposes
• other purposes benefiting community or particular segment of community

Modern trend - validate if possible

No RAP

Cy Pres - modify purpose if no longer possible. Find general charitable purpose to use cy pres.

Designate new charity - look to instrument. Settlor or trustee can choose replacement

Only Settlor and attorney general have standing

Question 18

Creating Express or Charitable Trust

Answer 18

• inter vivos or testamentary transfer
• declaration of Trust - settlor is also trustee
• deed of trust - settlor not trustee
• Testamentary - pour over and secret trust