Trusts & Future Interests

Question 1

Creation of Express Trust

Answer 1

• intent to create a trust
• valid purpose
• competent settlor
• property (res or corpus)
• trustee
• identifiable beneficiary

Question 2

Creation of Express Trust: Intent

Answer 2

intend for recipient to hold property for benefit of someone else.

Factors (considered in totality of circumstance):
- whether scope of property is reasonably certain enough so that duties would be imposed on identifiable property
- whether instructions about how to use property are sufficiently precise as to indicate who should benefit and how they should benefit
- language of transfer (most important): “I direct” or “I require” likely to create a trust as opposed to precatory instructions like “I wish” or “I hope”

Question 3

Creation of Express Trust: Valid Purpose

Answer 3

any purpose that is not illegal or against public policy.

if multiple purposes, can strike individual provisions that are not valid

condition that beneficiary divorce or not marry at all is against public policy and invalid UNLESS beneficiary = settlor’s spouse

Question 4

Creation of Express Trust: Competent Settlor

Answer 4

inter vivos trust: requires same level of competence to make a gift (create a trust during life with instructions about who beneficiaries are and how distributions should be made). Uniform Trust Code reduces level of competence required to the level required for a will (legal age, requisite mental capacity)

testamentary trust: same level required for will (lower than level required for gift)

Question 5

Creation of Express Trust: Property

Answer 5

any property will qualify.

held in name of trustee.

Question 6

Creation of Express Trust: Trustee

Answer 6

holds legal title to trust property, manages it for purposes of trust, and makes distributions to beneficiaries.

fiduciary and must comply with fiduciary duties.

can have more than one trustee and position is voluntary

A TRUST DOES NOT FAIL FOR LACK OF A NAMED AND WILLING TRUSTEE

Question 7

Trustee: Court Appointed

Answer 7

if no trustee named, or trustee does not want to or cannot serve, court appoints trustee

Question 8

Trustee: Acceptance

Answer 8

accepts
- by substantially complying with a method of acceptance provided in trust trust terms OR
- if no specified method or method not exclusive, by accepting delivery of trust property, exercising powers or performing duties as trustee, or otherwise indicating acceptance

Question 9

Trustee: Resignation

Answer 9

if accept, can resign
- by following procedures in trust instrument
- if no procedures, by following common law procedures (court approval) or statute (notice to beneficiaries and nay named successor trustee)

Question 10

Trustee: Liability After Resignation

Answer 10

remains liable for acts or omissions that occurred while trustee was acting as trustee

can be released from liability by asking a court to approve resignation and final account

Question 11

Creation of Express Trust: Identifiable Beneficiary

Answer 11

must have beneficiary that is identifiable or that is a class of identifiable persons

trust can have multiple beneficiaries and beneficiaries ma have interests at the same or different times

Question 12

Identifiable Beneficiary: Rights

Answer 12

• right to sue trustee if trustee mismanages or benefits personally from trust property
• right to distributions from trust as settlor provided
• right to be kept informed about trust so that she can protect her own interests
• right to enforce the trust by suing the trustee for breach of the trustee’s fiduciary duties

Question 13

Creation of Express Trust: Identifiable Beneficiary - Exceptions

Answer 13

four trusts do not need a beneficiary:
- charitable trust (benefits public at large or class/group with indefinite membership)
- honorary trust: if a person attempts to create a trust with no beneficiary or charitable purpose, court may (a) permit person holding property as intended trustee to carry out trust as an honorary trust by carrying out trust purpose or (b) distribute property to settlor’s estate
- animal trust: must be authorized by state statute; should provide for trustee, trust enforcer, and remainder beneficiary to take after animal’s death ; if no state statute, treated as honorary trust or property distributed through estate
- purpose trust: created for noncharitable purpose but without identifiable beneficiary; may not be enforced for more than 21 years

Question 14

Formalities: Common Law

Answer 14

no formalities required to create but if all necessary terms could not be proven, trust would fail

Question 15

Formalities: Modern Law

Answer 15

today, one party can be settlor, trustee, and beneficiary but need an additional party to be either co-trustee or co-beneficiary to have a valid trust

legal title held by trustee and equitable title held by beneficiary merge when trust has only one individual in all three roles

Question 16

Formalities: Oral Trusts

Answer 16

must be proven by CCE.

writing required for trust of property (SoF)

in a few states, writing required for personal property and the settlor usually needs to sign the writing

Question 17

Formalities: Testamentary Trusts

Answer 17

when trust created under a will, will must be executed with will formalities

Question 18

Types of Trusts

Answer 18

• private express
• inter vivos
• testamentary
• charitable
• totten trusts
• resulting
• revocable
• irrevocable
• pour-over wills

Question 19

Private Express Trust

Answer 19

express trust created for private, noncharitable purpose, usually with identifiable beneficiary

Question 20

Inter Vivos Trust

Answer 20

settlor can create a trust while alive by transferring property to someone to hold in trust, with instructions about who the beneficiaries are and how distributions should be made

settlor can create inter vivos trust with settlor acting as trustee

Question 21

Testamentary Trust

Answer 21

created in a will

when testator dies, personal representative charged with administering estate will distribute property to named trustee

subject to oversight of probate court and is public

irrevocable because settlor is dead when trust created

Question 22

Charitable Trust

Answer 22

express trust with charitable purpose. Can last in perpetuity.

Purpose must be:
- reasonably certain (court can determine settlor’s intent and that intent was exclusively charitable)
- for relief of poverty, advancement of education or religion, promotion of health, governmental or municipal purposes, or other purposes the achievement of which is beneficial to community, and
- not intermingled with private and other noncharitable objective

Question 23

Totten Trusts

Answer 23

revocable pay-on-death designation of a bank accuont

death beneficiary has no rights in bank account during owner’s lifetime and owner can use funds or change beneficiary whenever owner wishes

since legal and equitable titles are not separate, Totten Trust not considered a true trust

Question 24

Resulting Trust

Answer 24

when purpose of a trust can no longer be carried out, remaining trust property held as a resulting trust

property must be returned to settlor or be distributed through settlor’s estate

Question 25

Revocable Trust

Answer 25

revocable if settlor retains power to modify or revoke trust in trust instrument Common law: presume trust irrevocable and settlor must expressly reserve power to revoke UTC: trust presumed to be revocable

Question 26

Irrevocable Trust

Answer 26

settlor cannot modify or revoke it created in three ways: - testamentary trust irrevocable upon creation because settlor is dead - revocable living trust becomes irrevocable when settlor dies - settlor can create an irrevocable trust during the settlor's life

Question 27

Pour-Over Wills

Answer 27

will that pours over any remaining probate assets to the trustee of revocable living trust assets become part of trust corpus and are distributed through trust. if settlor has no probate assets when settlor dies, pour-over will does not need to be probated. But need to probate to distribute assets to trustee of trust if settlor had probate assets upon death

Question 28

Uniform Testamentary Additions to Trusts Act

Answer 28

if trust instrument exists, trust can be created when property transferred at death, under will, or by designating trust as a beneficiary under insurance policy trust considered inter vivos trust can amend trust instrument at any time pre-death and amendments to trust instrument after will's execution are valid

Question 29

Powers of Invasion

Answer 29

common law: trustee needed court permission to take action not authorized under trust terms modern trend: trustee has all legal powers necessary to accomplish trust objectives (provided not inconsistent with trust instrument)

Question 30

Mandatory Powers of Distribution

Answer 30

direction trustee must follow - no discretion to decide how much of corpus to distribute and to whom and when

Question 31

Discretionary Powers of Distribution

Answer 31

the more discretion the settlor gives to the trustee, the greater leeway the trustee has in making distributions and the more difficult it is for beneficiary to force distribution

Question 32

Discretionary Powers of Distribution: Ascertainable Standards

Answer 32

standard that court can determine under state law and that will be enforced (trustee must distribute "reasonable" amount within that standard) "health, education, maintenance, support"

Question 33

Discretionary Powers of Distribution: Nonascertainable Standards

Answer 33

court will almost never second guess decision to distribute or not if standard is nonascertainable as long as trustee actively considered whether to distribute something "welfare and best interests"

Question 34

Discretionary Powers of Distribution: Good Faith

Answer 34

even if trust instrument says can act in sole discretion, trustee must still act reasonably and in good faith cannot refuse to do anything and cannot act randomly without considering all appropriate info if fail to do this, court can overturn decision (abuse of discretion)

Question 35

Factors for Distribution

Answer 35

trustee must consider: - overall purpose of trust and interests of current and future beneficiaries - level of discretion and guidance provided by settlor - size of the trust - number of beneficiaries - beneficiaries' needs and resources - unless instrument provides otherwise, beneficiary's other income and assets before making a distribution - any direction from settlor to favor one beneficiary or one class of beneficiaries

Question 36

Rights to Distributions and Alienability of Interests: Mandatory Trusts

Answer 36

beneficiary's interest in a mandatory trust is freely alienable and creditors can reach interests and distributions exceptions: creditors cannot reach if trust instrument includes a spendthrift provision unless exception applies

Question 37

Rights to Distributions and Alienability of Interests: Discretionary Trusts

Answer 37

if assets subject to discretionary standard, not alienable by beneficiary beneficiary cannot compel discretionary distributions and these distributions cannot be reached by creditors, even if there is no spendthrift provision

Question 38

Discretionary Trust: Exceptions

Answer 38

court can order distribution of property subject to a discretionary standard: - to a child, spouse, or former spouse with order for support against beneficiary - if trustee failed to comply with standard for distribution for the beneficiary or abused discretion - in an amount that is equitable under the circumstances (not necessarily the amount of the order for support) - not more than the amount the trustee would have been required to distribute had the trustee complied with the standard or not abused the discretion

Question 39

Rights to Distributions and Alienability of Interests: Protective Trusts

Answer 39

allow a settlor to provide beneficiary with right to mandatory distributions with protection against beneficiary's creditors settlor can direct trustee to pay income to a beneficiary but if beneficiary's creditors or beneficiary attempt to attach the beneficiary's interest, trust automatically transformed into a discretionary interest and creditors cannot compel distribution of any part of beneficiary's interest

Question 40

Rights to Distributions and Alienability of Interests: Domestic Asset Protective Trusts

Answer 40

under common law, if settlor is a beneficiary of a trust the settlor created, settlor's creditors can reach as much of the property as can be distributed to the settlor. some states enacted statutes that allow a settlor to create a DAPT to protect property in trust from creditors with claims arising after trust's creation do not protect property from known creditors and settlor cannot serve as trustee

Question 41

Rights to Distributions and Alienability of Interests: Support Trusts

Answer 41

directs trustee to make distributions to beneficiary as needed for beneficiary's support support trust beneficiary cannot alienate his interest in the trust, and beneficiary's ordinary creditors cannot reach trust assets EXCEPTION: under common law, creditors that provide basic necessities can be paid from support trust (regardless of whether spendthrift provision)

Question 42

Rights to Distributions and Alienability of Interests: Spendthrift Trusts

Answer 42

spendthrift provision prevents beneficiary from assigning/selling their interest and prevents beneficiary's creditors from attaching interest creditor cannot reach either mandatory distributions or discretionary distributions - must wait until trustee distributes property to beneficiary and then try to collect

Question 43

Spendthrift Trust Exceptions

Answer 43

some states allow certain creditors to attach some trust assets, even with spendthrift provision in place. These creditors include: - children or former spouse with orders for support - creditors who provide basic necessities - lawyers who helped beneficiary protect beneficiary's interest in trust - state and U.S. govt's to extent provided by state and federal laws - tort creditors in some circumstances (in small number of states) can get court order regarding amount of mandatory distributions but cannot reach discretionary distributions unless exception applies

Question 44

Powers to Modify When Settlor Alive: Revocable Trusts

Answer 44

if settlor retained power to revoke, can change provision or revoke entire trust as long substantially complies with trust provision concerning revocation and modification (writing delivered to trustee)

Question 45

Powers to Modify When Settlor Alive: Revocation by Will

Answer 45

will substitutes cannot be revoked by will except in a few states. UTC permits settlor of revocable trust to revoke by will either: - by expressly referring to that trust or trust property - by giving away property that had been in trust and held by trustee or - by executing a will and delivering that writing to trustee

Question 46

Powers to Modify When Settlor Alive: Revocation if Settlor Loses Capacity

Answer 46

under some circumstances, agent acting under power of attorney or conservator or guardian may exercise settlor's power to revoke

Question 47

Powers to Modify When Settlor Alive: Irrevocable Trusts

Answer 47

to revoke or modify irrevocable trust, current and future beneficiaries, including unborn and unascertained beneficiaries, must consent to modification or revocation

Question 48

Settlor's Death

Answer 48

trust becomes irrevocable upon death of settlor and modification authorized in three circumstances: - material purpose + consent - doctrine of equitable deviation - cy pres doctrine

Question 49

Powers to Modify When Settlor Not Alive: Material Purpose + Consent

Answer 49

court will grant modification if: - will not impair a material purpose of settlor in creating the trust and - all beneficiaries consent or court determines that interests of any beneficiary who dos not consent will be adequately protected

Question 50

Representation of Beneficiaries

Answer 50

if beneficiary minor, unborn, unascertained, incapacitated, or cannot be located, following types of representation allowed: - parent can represent unborn or minor child - conservator or guardian can represent protected person - person with substantially identical interest can represent a beneficiary with respect to that interest - court can appoint a representative for beneficiary

Question 51

Powers to Modify When Settlor Not Alive: Doctrine of Equitable Deviation

Answer 51

court will grant modification if - circumstances have changed or unanticipated circumstances have arisen and - compliance with original terms would thwart or considerably impair the trust purpose for charitable trusts, courts more willing to grant deviation if restriction is ADMINISTRATIVE as opposed to restriction that impacts purpose (because want to facilitate trustee's ability to carry out the purpose)

Question 52

Powers to Modify When Settlor Not Alive: Cy Pres Doctrine

Answer 52

court will grant modification if - restriction on use of property in charitable trust becomes impossible, impracticable, illegal, or wasteful - restriction involves a charitable purpose - appropriate modification that will be consistent with settlor's objectives when creating trust and - settlor had general charitable interest. if specific charitable interest, cy pres will not apply and property reverts via a resulting trust to settlor's estate

Question 53

Cy Pres Doctrine: Specific Charitable Intent

Answer 53

settlor wanted property used only for a specified charitable purpose and that specified purpose becomes impossible

Question 54

Cy Pres Doctrine: Presumption

Answer 54

rebuttable presumption that settlor had general charitable intent overcome only if - terms of trust provide for reversion or a gift to a noncharitable beneficiary and - reversion happens while settlor still alive or gift to another beneficiary occurs within 21 years after creation of trust

Question 55

Other Ways to Modify a Trust

Answer 55

- naming a trust director or protector who is given power to modify - trust decanting

Question 56

Trust Decanting

Answer 56

process by which trustee pours assets of trust from old trust to new trust with different terms if trustee had limited (ascertainable) discretion to distribute trust property, then trustee can modify only administrative provisions if trustee had broad (nonascertainable) discretion, new trust can have new dispositive provisions

Question 57

Termination

Answer 57

if trust instrument does not say what happens to remaining assets, then trust is a resulting trust, and assets are returned to settlor or settlor's estate terminates: - on its terms - when it has no more assets - if its purpose is completed - no longer has valid purpose - by modification that results in termination - by merger (legal and equitable interests of a trust are held by same party)

Question 58

Breach of Trust

Answer 58

trustee responsible for carrying out terms of trust (settlor's instructions). if fail to carry out fiduciary duties, in breach of trust

Question 59

Remedies for Breach of Trust

Answer 59

court may: - compel trustee to carry out their duties - enjoin trustee from committing breach of trust - require trustee to fix breach - require trustee to prepare an accounting of receipts and disbursements - reduce or deny the trustee's compensation - demand that trustee pay damages - remove trustee

Question 60

Exculpatory Provision

Answer 60

provisions that relieve a trustee of liability for a breach are generally unenforceable as to actions constituting gross negligence or actions taken in bad faith or with reckless indifference to trust purposes or interests of beneficiaries

Question 61

Trustee Fiduciary Duties

Answer 61

- duty of obedience - duty of loyalty - duty of care (duty to keep proper records, duty not to commingle, duty to earmark) - duty to be a prudent investor - duty of impartiality - duty to inform and report

Question 62

Duty of Obedience

Answer 62

trustee must carry out terms of trust and comply with laws affecting trust

Question 63

Duty of Loyalty

Answer 63

must act in sole interest of beneficiaries important issues: self-dealing, conflict of interest

Question 64

Duty of Loyalty: Self-Dealing

Answer 64

if self-dealing (trustee on both sides of transaction), no further inquiry and beneficiary can void even if it was fair to trust and beneficiaries. EXCEPTIONS: not voidable if - terms of trust authorize trustee to engage in particular transactions with trust - beneficiaries consent to transaction or - trustee received court approval for transaction (court will review fairness but even if financially fair, may not approve if beneficiary opposes it)

Question 65

Duty of Loyalty: Conflict of Interest

Answer 65

COI transaction voidable only if transaction is not fair arises when trustee engages in a transaction with a family member or with a business with which the trustee is connected

Question 66

Duty of Care

Answer 66

trustee must manage and care for trust property, with reasonable care, skill, and caution includes: - duty to keep proper records - duty not to commingle - duty to earmark

Question 67

Duty of Care: Duty to Keep Proper Records

Answer 67

trustee must keep accurate records of the trust property, keeping track of receipts and disbursements

Question 68

Duty of Care: Duty Not to Commingle

Answer 68

trustee should not combine trust assets with trustee's own personal assets. If trustee is a corporate trustee, trustee can place trust property in a shared fund for purpose of investment but trust interest must still be capable of being identified as actual trust property later

Question 69

Duty of Care: Duty to Earmark

Answer 69

trustee must hold assets as trustee, labeling property as property held in trustee's fiduciary capacity and not in individual capacity

Question 70

Duty to be a Prudent Investor

Answer 70

must invest property as a prudent investor would two goals - generate income for income beneficiaries - increase value of trust assets for remainder beneficiaries can delegate ministerial duties and powers to a 3P. at common law, could not delegate discretionary duties but under modern practice can transfer power to make investment decisions to a person with greater expertise (obligation to exercise reasonable care in both selecting person who will manage funds and in monitoring activities of tha tperson)

Question 71

Duty to be a Prudent Investor: Considerations for Investments

Answer 71

trustee should consider: - general economic conditions and financial information investors typically consider - trust's purpose and any specific instruments on investments from settlor - size of the trust - needs of current and future beneficiaries, their other income and assets, and the timing of distributions from trust - diversification (unless reasonably determines that trust purposes better served by not diversifying because of special circumstances) - how to minimize fees associated with investing - whether trustee is chosen for special expertise in investing

Question 72

Duty of Impartiality

Answer 72

trustee must act fairly and impartially toward all beneficiaries must consider interests and needs of all trust beneficiaries, both current and future duty to act impartially is not the duty to treat the beneficiaries equally. DUTY TO BE FAIR, GUIDED BY THE TRUST TERMS

Question 73

Duty to Inform and Report

Answer 73

duty to provide information about trust to beneficiaries and keep them reasonably informed about trust property and distributions, trust administration, and material facts necessary for them to protect interests two key duties - trustee must respond to a reasonable request for information - trustee must proactively provide information about trust to a more limited group of beneficiaries but need not provide information to remote beneficiaries unless they ask

Question 74

Principal and Income Allocations

Answer 74

if directed to pay income to beneficiary, must pa the amount in the income account to that beneficiary if authorized to make distributions from principal, those distributions come from principal account

Question 75

Trust Receipts

Answer 75

- interests, dividends, rents, and business profits received by trust are TRUST INCOME - contributions of assets to trust by settlor and capital gains on sale of trust assets are allocated to TRUST PRINCIPAL

Question 76

Trust Disbursements

Answer 76

- ordinary expenses incurred from management of trust property, expenses related to rental properties and other investments, distributions to income beneficiaries are made from TRUST INCOME - extraordinary expenses and capital improvements to rental properties are made from TRUST PRINCIPAL - one half of trustee's regular compensation for services performed for income beneficiary is made from trust income while remainder half of trustee's compensation is from principal

Question 77

Power to Adjust

Answer 77

when investing, trustee can adjust between income and principal as long as investing as prudent investor, complying with duty of impartiality, and carrying out settlor's intentions for distributions to beneficiaries

Question 78

Unitrust

Answer 78

eliminates need to distinguish between principal and income because pays a beneficiary a fixed percentage of the fair market value of the trust

Question 79

Life Insurance Proceeds

Answer 79

life insurance policy or other contract naming the trust or trustee as beneficiary will be allocated to principal exceptions: contracts that insure trustee against a loss of occupancy or other use sustained by income beneficiary

Question 80

Principal and Income Allocations: Termination

Answer 80

when trust terminates, remaining principal is paid to remainder beneficiaries

Question 81

Future Interests

Answer 81

owner of property can create a legal life estate and legal remainder in property (legal interests) but usually the owner transfers the property into a trust and creates equitable interests (interests in trust) terminology for legal interests and interests in trust is the same

Question 82

Acceleration

Answer 82

common law: vested remainder accelerates into possession when prior interest ends. contingent remainder will not accelerate into possession until condition occurs

Question 83

Disclaimer

Answer 83

beneficiary can refuse to accept her interest in trust property - under common law, disclaimer of prior estate did not result in acceleration of contingent remainder - today, in about half the states, person disclaiming an interest will be treated as if they died immediately before time of distribution of interest. If remainder beneficiaries must survive the disclaimant to take, then that condition is treated as having occurred Disclaimer must be in writing signed by disclaimant and must be executed within 9 months after event that renders disclaimant's interest indefeasibly vested

Question 84

Powers of Appointment: Trust v. Will

Answer 84

powers of appointment are typically created over property held in trust, but a testator can give someone power to distribute probate property by including a power in a will

Question 85

Powers of Appointment: General v. Nongeneral

Answer 85

general power is power that can be exercised in favor of powerholder, powerholder's estate, powerholder's creditors, or creditors of powerholder's estate nongeneral power is a power that cannot be exercised in favor of anyone in those categories

Question 86

Powers of Appointment: Creation

Answer 86

donor must intend to create power of appointment. if does so intend, powerholder does not take title to property but has power to direct where it goes do not need to use specific words but precatory words like "desire" and "wish" make it less likely that it's a power of appointment

Question 87

Powers of Appointment: Exercising the Power

Answer 87

powerholder can choose how and whether to exercise power unless donor of a nongeneral power expresses a contrary intent, powerholder has same discretion in making an appointment as the donor had in disposing of the property

Question 88

Powers of Appointment: Permissible Appointees

Answer 88

powerholder can exercise power (appoint property) only for permissible appointees, also known as objects of power permissible appointees can be individuals, a class, or a category (like charities)

Question 89

Powers of Appointment: Takers in Default

Answer 89

a person who will take the property subject to the power if the powerholder does not exercise the power

Question 90

Powers of Appointment: Impermissible Appointees

Answer 90

if donee appoints property to someone who is not permissible, appointment ineffective and property passes to taker in default. if partially effective, effective part can remain unless scheme of disposition is more closely approximated by deciding that some or all of the effective part should be redacted as well

Question 91

Powers of Appointment: Factors to Determine if Effective

Answer 91

- if donor requires specific reference to power to avoid inadvertent exercise of power, powerholder must refer to power when exercising it - blanket-exercise clause may not be sufficient to exercise power if donor required a specific reference to the pwer - residuary clause without more will not exercise a power unless (a) power is a general power and (b) the will has no gift-in-default clause or the gift-in-default clause is ineffective - if evidence shows that the powerholder knew about power and intended to exercise the power, then an attempt to exercise the power may be sufficient even if it does not comply with a specific reference requirement

Question 92

Powers of Appointment: Failing to Exercise the Power

Answer 92

if grant of power does not indicate takers in default, then - for a general power, taker is powerholder's estate - for a nongeneral power, takers are eithers (a) permissible appointees if they are a defined and limited class or (b) the taker is the donor's estate if the permissible appointees cannot be determined

Question 93

Powerholder Fiduciary Duties

Answer 93

no fiduciary duties apply to a powerholder

Question 94

Powers of Appointment: Rights of Creditors

Answer 94

common law: creditors of holder of general power had no rights today, in minority of states, creditors can reach property subject to general power - general power will be treated as nongeneral power if powerholder's power to appoint to herself was created by someone else and is subject to an ascertainable standard creditors of holder of nongeneral power of appointment have no rights in appointive property

Question 95

Survival (Common Law)

Answer 95

nonprobate transfers do not automatically require survival. if trust instrument or other nonprobate document does not explicitly require a beneficiary to survive to take, then requirement of survival will not be read into documented unless gift is to multigenerational class

Question 96

Multigenerational Class Gift

Answer 96

gift to descendants or to issue implies requirement of survival for class members. person in one generation represents descendants of that person so that if person survives to the date of distribution, then that person takes gift. If that person does not survive until that time, person's descendants take instead

Question 97

Construction Problems: Survival (Common Law) - Silent on Survival

Answer 97

If trust instrument silent on survival, named beneficiary will take property under the trust, even if beneficiary died long before time for distribution (distributed through beneficiary's estate)

Question 98

Survival (Common Law): Date for Survival

Answer 98

if trust provides gift to remainder beneficiary, with a gift to remainder beneficiary's "surviving children", if remainder beneficiary is not alive at date of distribution, prevailing view is that children must survive until distribution date if remainder beneficiary dies without descendants and gift does not clarify whether substitute gift occurs only if remainder beneficiary dies before income beneficiary or substitute gift could occur if remainder beneficiary survives time of distribution but later dies without descendants, prevailing view is that condition is determined as of the time of distribution

Question 99

Survival (Common Law): Survival to a Specific Age

Answer 99

if trust requires beneficiary to reach a specific age and does not explain what happens if beneficiary dies before reaching specified age, property will be distributed to beneficiary's estate Restatement view: beneficiary's estate will not receive the property. will revert to settlor if trust instrument does not provide other instructions

Question 100

Survival (Statutory Approach)

Answer 100

statutes adopted in some states do imply survival requirement unless grant explicitly says survival not required in these states, beneficiary of future interest must survive until time the beneficiary could come into possession or enjoyment of interest 120-hour rule applies so beneficiary must survive for five days after distribution date

Question 101

Survival (Statutory Approach): Effect

Answer 101

if beneficiary fails to survive, interest distributed to beneficiary's descendants if no descendant living at distribution date, interest reverts to settlor and passes through settlor's estate to residuary devisees named in settlor's will, or if settlor did not leave a will, to the settlor's heirs these states apply rules of lapse and antilapse from wills law to future interests

Question 102

Class Gifts

Answer 102

common law: if one class member predeceases distribution, other class member divide gift. if gift is a gift to individuals (and not a class), each individual has a separate interest and the individual's interest is vested so distributed to individual's estate

Question 103

Factors to Determine If Class Gift

Answer 103

- whether settlor used a group term - whether named beneficiaries are related to settlor in the same way - whether property is a piece of land that the settlor wants to keep in the family

Question 104

Class Gifts: Gifts of Income

Answer 104

if trust instrument is silent about what happens when one class member dies, traditional rule is that the surviving members of the class divide the income Restatement: remainder will pass to all income beneficiaries' descendants when last income beneficiary dies, then when one income beneficiary dies, beneficiary's share of income will be paid to beneficiary's descendants

Question 105

Class Gifts: Gifts to Children

Answer 105

gift to "my children" means that descendants of a deceased child will not take if settlor intends a gift to descendants, should use the term descendants

Question 106

Class Gifts: Gifts to Descendants

Answer 106

courts have created a rebuttable presumption that descendants take by representation but language in document may suggest that settlor intended a per capita distribution instead

Question 107

Class Gifts: Gifts to Heirs

Answer 107

traditional rule of construction is that a person's heirs are determined at the date of the person's death some states follow modern rule which provides that if a designated person's heirs receive a remainder interest following a life estate, then a determination of the designated person's heirs is made on the distribution date as if the designated person had died intestate

Question 108

Class Gift: Class Closing Rules

Answer 108

gift to a class will close and no more class members will be added on the earlier to occur of: - death of person whose children form the class and - date any beneficiary is entitled to take possession of the beneficiary's share of the gift

Question 109

Definition of Family

Answer 109

if trust instrument includes definition of family members, that definition control if no definition, use legal definition (usually definition found in intestacy statutes)