Trusts Law LAST PUSH

Question 1

Trustee’s Fiduciary Responsibility

Answer 1

(1) must deal with the property with reasonable care
(2) must maintain the utmost degree of loyalty
(3) is personally responsible if their conduct falls beneath required standards

Question 2

Express Trust

Answer 2

express trusts are created by the express intention of the settlor

Question 3

Categories of Express Trusts

Answer 3

(1) private
(2) charitable

Question 4

Trusts Created by Operation of Law

Answer 4

(1) resulting trusts
(2) constructive trusts

Question 5

Five Main Elements of a Trust

Answer 5

(1) intent
(2) identifiable corpus
(3) ascertainable beneficiaries
(4) proper purpose
(5) mechanics and formalities

Question 6

UTC Express Trusts Required Elements

Answer 6

(1) a settlor with capacity to convey
(2) a present intent to create a trust relationship
(3) a competent trustee with duties
(4) a definite beneficiary and
(5) the same person is not the sole trustee and sole beneficiary
(6) present disposition in trust of specific property then owned by the settlor
(7) valid trust purpose

Question 7

Precatory Inference Overcome

Answer 7

(1) definite and precise directions
(2) directions addressed to a fiduciary
(3) a resulting unnatural disposition of property if no trust imposed; or
(4) extrinsic evidence showing that the settlor previously supported the intended beneficiary

Question 8

Qualified Beneficiaries

Answer 8

a beneficiary who, on the date the beneficiaries qualification is determined, is:
(1) a current beneficiary or
(2) a first-line remainderman

Question 9

Trust Purpose Invalid

Answer 9

(a) illegal
(b) contrary to public policy
(c) impossible to achieve
(d) intended to defraud the settlor’s creditors or based on illegal consideration

Question 10

Acts Contrary to Public Policy

Answer 10

(a) induce others to engage in criminal or tortious acts
(b) encourage immorality
(c) induce a person to neglect parental, famillal, or civic duties

Question 11

Condition Attached to Interest is Against Public Policy

Answer 11

(a) the settlor’s alternative desire controls if expressed
(b) if the illegal condition is a condition subsequent, the condition is invalidated but the trust is valid
(c) if the illegal condition is a condition precedent, the preferred view is to hold the interest valid unless there is evidence that the settlor’s wish would be to void the beneficiaries interest altogether if the condition is unenforceable

Question 12

Acceptance of Trusteeship

Answer 12

person accepts by:
(1) signing the trust or a sperate written acceptance
(2) substantially complying with the acceptance terms of the instrument
(3) accepting delivery of trust property, exercising powers, or performing duties as trust, or indicating acceptance.

Question 13

Removal of Trustee

Answer 13

a court can remove a trustee on its own motion or upon request by the settlor, a beneficiary, or trustee

Question 14

Removal of Trustee Grounds

Answer 14

(1) a serious breach of trust
(2) serious lack of cooperation among co-trustees
(3) unfitness, unwillingness, or persistent failure to administer
(4) a substantial change in circumstances

Question 15

Trust Creation (mechanics)

Answer 15

(1) inter vivos transfer
(2) inter vivos declaration of trust
(3) by will

Question 16

Pour Over Funding

Answer 16

trust may remain unfunded during the settlors lifetime - pour over property can be initial trust funding if:
(a) the trust is identified in the will and
(b) the trust is executed before the testator’s death

Question 17

Spendthrift Provisions Ineffective Against Certain Creditors

Answer 17

a spendthrift clause cannot be used to shield the beneficiary from:
(1) judgments or court orders for support or maintenance of the beneficiary’s child, spouse, or former spouse
(2) claims by the government

Question 18

Trust Termination

Answer 18

terminated automatically upon the expiration of the term specified in the instrument or when all of the purposes of the trust have been accomplished or have become unlawful, contrary to public policy, or impossible to achieve

Question 19

Termination or Modification - by Beneficiary - With Settlor’s Consent

Answer 19

a trust may be terminated or modified upon the consent of the settlor and all beneficiaries, even if the mod or termination conflicts with a material purpose of the trust

Question 20

Termination or Modification - by Beneficiary - Without Settlor’s Consent

Answer 20

a trust may also be terminated or modified on the consent of only all beneficiaries but only if no material purpose of the trust would thereby be frustrated

Question 21

UTC Court Modification

Answer 21

a court may modify a trust even without the consent of all of the beneficiaries if
(1) the trust could have been terminated had all the beneficiaries consented
(2) the interest of a beneficiary who does not consent will be adequately protected

Question 22

Termination or Modification by Operation of Law - By the Court

Answer 22

a court may terminate or modify a trust if:
(1) the trust could have been modified if all beneficiaries had consented
(2) the interest of any noncosenting beneficiaries will be adequately protected

Question 23

Termination or Modification by Operation of Law - By Court Additional Ways

Answer 23

(1) unanticipated circumstances threaten the purposes of the trust
(2) continuation of the trust on its existing terms is impracticable or wasteful or
(3) value of the trust is insufficient to justify the cost of administration or to achieve the settlors tax objectives

Question 24

Powers of the Trustee

Answer 24

(1) powers expressly conferred upon them by the terms of the trust
(2) powers granted by state law; and
(3) implied powers that are appropriate to achieve the proper investment, management, and distribution of the trust property

Question 25

Trustee’s Powers under UTC

Answer 25

(1) powers conferred by the terms of the trust
(2) powers that an unmarried competent owner has over individually owned property
(3) any other powers appropriate to achieve the proper investment, management, and distribution of trust property
(4) any other powers conferred by the UTC

Question 26

Trustee’s Duty of Loyalty

Answer 26

(1) trustee cannot buy or sell trust assets eve if the price is a fair one
(2) a trustee may not sell property of one of the trust to another trust of which they are also trustee
(3) a trustee may not borrow trust funds nor loan their personal funds to the trust and any interest pain on such a long must be returned to the trust
(4) a trustee cannot use trust assets to secure a personal loan
(5) a trustee cannot personally gain through their position
(6) a corporate trustee cannot invest in its own stock as a an investment
(7) self employment can constitute a form of prohibited dealing

Question 27

Beneficiaries Rights in Prohibited Transaction

Answer 27

voidable by the beneficiary affected by the transaction unless:
(1) a court or the terms of the trust approved it
(2) the beneficiary failed to bring suit within the prescribed time period
(3) the beneficiary gave their consent, ratification, or release
(4) it involves a contract or claim arising before the trustee became trustee

Question 28

Duty to Report

Answer 28

a trustee must:
(1) provide the qualified beneficiaries with the trustee’s name, address, and telephone number
(2) respond to beneficiary requests for information about the trusts administration and provide a copy of the trust instrument if requested
(3) furnish an annual accounting of the trust

Question 29

Trustee Delegation of Investment and Management Functions Permitted

Answer 29

trustee must act prudently in:
(1) selecting an agent
(2) establishing the scope and terms of the delegation
(3) periodically reviewing the agents action

Question 30

Remedies for Breach of Trust

Answer 30

if the trustee commits, or is about to commit, a breach of trust duties the court may:
(1) enforce specific performance of the trustee’s duties
(2) enjoin the trustee from committing a breach of trust
(3) compel the trustee to pay money or restore property or
(4) suspend or remove the trustee

Question 31

Damages to Beneficiary for Breach

Answer 31

if a trustee commits a breach of trust, the trustee is liable to the beneficiaries for the greater of:
(1) the amount necessary to restore the trust property and distributions to what they would have been absent the breach or
(2) the trustees profit from the breach

Question 32

Remedies for Self Dealing

Answer 32

in the case of self dealing, the beneficiary may have a choice of the following:
(1) affirm the transaction if the trust profited
(2) set aside the transaction if the trust lost money
(3) trace profits from the trustee if the trustee profited

Question 33

When Trustee is Not Liable For Breach

Answer 33

a trustee is not liable to a beneficiary for a breach of trust if:
(1) the trustee acted in reasonable reliance on the terms of the trust
(2) the beneficiary consent to the conduct, released the trustee from liability, or ratified the transaction, so long as the beneficiary was not improperly induced

Question 34

Effect of Exculpatory Clauses

Answer 34

VOID if they:
(1) relieve the trustee of liability for breach of trust committed in bad faith or with reckless indifference or
(2) appear in the trust instrument because of the trustee’s abuse of a confidential relationship with the settlor

Question 35

Trustee Removal

Answer 35

(a) incapacity
(b) unfitness
(c) commission of a serious breach of trust
(d) serious conflict of interest
(e) insolvency
(f) extreme hostility between the trustee and beneficiaries but only if it would interfere with proper trust administration
(g) refusal to post any required bond
(h) refusal to account
(i) lack of cooperation among co-trustees that substantially impairs administration
(j) unwillingness or persistent failure to administrate
(k) substantial change of circumstances so that removal is in the best interest of all beneficiaries

Question 36

Direct Action by Beneficiary EXCEPTIONS to General Prohibition

Answer 36

trustee:
(1) participated in the breach
(2) has left the jurisdiction and no successor trustee is appointed OR
(3) fails to sue a third person liable in tort or contract

Question 37

Factors to be Considered in an Adjustment

Answer 37

p 42

Question 38

Charitable Purposes

Answer 38

(1) relief of poverty
(2) advancement of education or religion
(3) the promotion of health
(4) accomplishment of government purposes

Question 39

Resulting Trust Types

Answer 39

(1) purchase money resulting trusts
(2) resulting trusts arising on failure of an express trust
(3) resulting trusts arising from an incomplete disposition of trust assets

Question 40

Circumstances Giving Rise to Resulting Trust (Based on Failing Express Trust)

Answer 40

settlor has conveyed property to a trustee under an express trust and (1) the trust is void or unenforceable or (2) the beneficiary is dead or cannot be located

Question 41

Resulting Trust Not Implied Where

Answer 41

(1) the trust instrument specifically or implicitly provides for disposition of trust property when the trust has failed or been completed
(2) the settlor was given consideration for their original transfer in trust
(3) the settlor created a trust for an illegal purpose
(4) cy pres is inapplicable

Question 42

Constructive Trusts Imposed When

Answer 42

(1) fraudulent promise
(2) breach of a promise by one in a confidential relationship
(3) breach of a promise by the deciedent’s devisee or heir to hold property for the benefit of a third person
(4) breach of a promise by the decedent to a devise property to one rendering service in reliance thereupon
(5) breach of a promise to the debtor by the buyer at the foreclosure sale to hold the property for the debtor, causing the debtor to forgo bidding at the sale