Trusts Review

Question 1

Why are trusts promoting education considered charitable?

Answer 1

because they benefit the public

Question 2

what does a spendthrift trust do?

Answer 2

prevents a beneficiary from transferring their interest in the trust

Question 3

Despite a spendthrift protection, for what purpose can trust assets be reached by creditors?

Answer 3

1. spousal support
2. child support
3. federal income taxes

Question 4

what is a discretionary trust?

Answer 4

A trust where the TT is given discretion to make or withhold distributions of income and principal

Question 5

In a discretionary trust, can the settlor, beneficiary, or the beneficiary’s creditors compel a distribution?

Answer 5

no unless the CR has served the TT with notice of the claim (then CR only can compel the distribution)

Question 6

how can an irrevocable trust be terminated?

Answer 6

by consent of all existing beneficiaries if no material purpose of the trust would be frustrated

-can also be terminated by consent of the settlor and consent of all beneficiaries (including all potential beneficiaries)

Question 7

can an irrevocable trust be terminated with the consent of the settlor and the TT?

Answer 7

no

Question 8

how must a TT exercise discretionary power?

Answer 8

in good faith

Question 9

is a TT’s exercise of discretion subject to judicial review?

Answer 9

yes, reviewable for abuse of discretion

Question 10

in a revocable trust, to which parties does a TT owe a duty?

Answer 10

to the settlor only

Question 11

if there is more than one beneficiary and each have differing interests (i.e. one has a life estate and the other a remainder), what must the TT do?

Answer 11

act impartially and take into consideration any differing interests of the beneficiaries

Question 12

If a TT who is a lawyer renders service to the trust for a fee, is the TT’s duty of undivided loyalty violated?

Answer 12

yes

Question 13

Can the TT of a sizable trust who has limited investing experience delegate investment decisions?

Answer 13

yes but the TT must monitor the agent’s performance

Question 14

To whom and for what amount is a TT liable to/for if TT commits a breach of trust?

Answer 14

Liable to the beneficiaries for the greater of the amount needed to restore the trust property and distributions and the TT’s profit from the breach

Question 15

Is a TT liable for breach of trust when the TT reasonable relied on the terms of the trust and the breach resulted?

Answer 15

no

Question 16

Must a trust be established in a testator’s life time when the testator creates a pour over will?

Answer 16

yes

Question 17

what is a Totten trust?

Answer 17

A Totten trust is a deposit of money in the depositor’s own bank account in trust for another person. (note: this creates a valid revocable trust that is not revoked by the depositor predeceasing the beneficiary)

Question 18

what duty does a TT of a constructive trust not have?

Answer 18

the duty to invest the trust property and make it productive

Question 19

If a settlor promises to create a trust when he collects a debt, does this form a valid trust?

Answer 19

no b/c it fails for lack of intent to create a trust

Question 20

how must the powers of co-TTs be exercised?

Answer 20

majority decision

Question 21

If termination or modification is not available because all of the beneficiaries do not or cannot consent, or because a material purpose will be frustrated, the parties may seek modification by the court if: (i) the trust could have been modified if all beneficiaries had consented, and (ii):

Answer 21

the interests of the non consenting beneficiaries will be protected

Question 22

Can a court modify or terminate a trust if it determines the interests of justice so require?

Answer 22

no (a settlor can dispose of his property as he wishes even if it is unjust)

Question 23

to what does cy pres apply?

Answer 23

both trusts and outright gifts

Question 24

what does cy pres do?

Answer 24

Generally, cy pres dictates that the court must determine the settlor’s primary purpose, although other purposes should be taken into account. Court can use this to modify a trust

Question 25

If a settlor creates a trust but its terms are silent as to whether it is revocable or amend mendable, the settlor…

Answer 25

may both amend and revoke the trust

Question 26

the power to revoke includes what?

Answer 26

the power to amend