Trusts Review Flashcards
Why are trusts promoting education considered charitable?
because they benefit the public
what does a spendthrift trust do?
prevents a beneficiary from transferring their interest in the trust
Despite a spendthrift protection, for what purpose can trust assets be reached by creditors?
- spousal support
- child support
- federal income taxes
what is a discretionary trust?
A trust where the TT is given discretion to make or withhold distributions of income and principal
In a discretionary trust, can the settlor, beneficiary, or the beneficiary’s creditors compel a distribution?
no unless the CR has served the TT with notice of the claim (then CR only can compel the distribution)
how can an irrevocable trust be terminated?
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)
can an irrevocable trust be terminated with the consent of the settlor and the TT?
no
how must a TT exercise discretionary power?
in good faith
is a TT’s exercise of discretion subject to judicial review?
yes, reviewable for abuse of discretion
in a revocable trust, to which parties does a TT owe a duty?
to the settlor only
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?
act impartially and take into consideration any differing interests of the beneficiaries
If a TT who is a lawyer renders service to the trust for a fee, is the TT’s duty of undivided loyalty violated?
yes
Can the TT of a sizable trust who has limited investing experience delegate investment decisions?
yes but the TT must monitor the agent’s performance
To whom and for what amount is a TT liable to/for if TT commits a breach of trust?
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
Is a TT liable for breach of trust when the TT reasonable relied on the terms of the trust and the breach resulted?
no
Must a trust be established in a testator’s life time when the testator creates a pour over will?
yes
what is a Totten trust?
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)
what duty does a TT of a constructive trust not have?
the duty to invest the trust property and make it productive
If a settlor promises to create a trust when he collects a debt, does this form a valid trust?
no b/c it fails for lack of intent to create a trust
how must the powers of co-TTs be exercised?
majority decision
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):
the interests of the non consenting beneficiaries will be protected
Can a court modify or terminate a trust if it determines the interests of justice so require?
no (a settlor can dispose of his property as he wishes even if it is unjust)
to what does cy pres apply?
both trusts and outright gifts
what does cy pres do?
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
If a settlor creates a trust but its terms are silent as to whether it is revocable or amend mendable, the settlor…
may both amend and revoke the trust
the power to revoke includes what?
the power to amend
