Types Of Trusts

Question 1

Can a trust instrument be revocable?

Answer 1

Yes; may be revocable or irrevocable by the settlor—whatever stated in trust. If no designation, state law governs by default

Majority: trusts are irrevocable by default unless expressly stated otherwise
Minority/UTC: trust is revocable by default UNLESS stated otherwise

Question 2

What is a pour-over provision in a will?

Answer 2

Gifts property to a previously established trust, which is then distributed according to the terms of the trust

Question 3

How is a pour over provision distinguishable from a testamentary trust?

Answer 3

A pour over provision doesn’t create a trust; it transfers property to a trust already in existence; thus, must be connected to an inter vivos trust (made during testator’s lifetime)

Question 4

Is a testamentary disposition to an inter-vivos trust valid?

Answer 4

Yes, even if trust instrument is amendable or revocable

Question 5

When are the terms of a testamentary disposition to an inter-vivos trust determined?

Answer 5

The terms are determined as the trust appears on the date of the testator’s death

Question 6

What is the effect of a revocation or termination of a trust before the testator’s death on a testamentary disposition?

Answer 6

Unless otherwise provided in will, the gift lapses

Question 7

What is a charitable trust?

Answer 7

One created by settlor to confer a substantial benefit to society

Question 8

Must the beneficiary of a charitable trust be definite?

Answer 8

No, may be indefinite or contain a class of persons described by trust

Question 9

Does the RAP apply to charitable trusts?

Answer 9

No

Question 10

Will a charitable trust fail for want of a specific purpose or beneficiary?

Answer 10

No; court may select a purpose or beneficiary consistent with settlor’s intent

Question 11

Who may enforce a charitable trust?

Answer 11

Settlor, qualified beneficiary, or attorney general

Question 12

When will a trust naming a specific purpose or beneficiary terminate?

Answer 12

Upon that specified charity’s termination

Question 13

What is the doctrine of cy pres?

Answer 13

Equitable doctrine that applies to charitable bequests and charitable trusts

Question 14

When will courts apply cy pres to modify a charitable trust?

Answer 14

If settlor’s general intended purpose is frustrated—impracticable, unlawful, or wasteful—the court will substitute a new charitable purpose “as near as possible” with settlor’s or testator’s intent.

NOTE: only applies where testator had a GENERAL charitable intent

Question 15

When does a discretionary trust occur?

Answer 15

When a trustee has absolute discretion and power to determine when and how much of the trust property is distributed to the beneficiaries of the trust

Question 16

What is the only requirement for a trustee’s exercise of discretion?

Answer 16

Must be in good faith

Question 17

When will a court interfere with a trustee’s exercise of discretion?

Answer 17

When there is an abuse of power/discretion, dependent upon:
1. The terms of the trust instrument; AND
2 the other duties of the trustee (e.g., the duty to administer the trust according to its terms, duty to act impartially, and duty of care)

Question 18

What is a support trust?

Answer 18

Contains a provision directing the trustee to pay the beneficiary as much income and principal as is necessary for the beneficiary’s support—may be pure or discretionary

Question 19

When may a beneficiary compel a trustee to make payments according to a discretionary support trust provision?

Answer 19

When the provision contains an ascertainable standard

Question 20

What is a common example of an ascertainable standard in a discretionary support what?

Answer 20

One that provides for an individual’s health, education, support, or maintenance

Question 21

How is the definition of support defined in a discretionary Support trust?

Answer 21

Fact-dependent; measured by lifestyle the beneficiary has been accustomed to; includes more than just necessities and bare essentials;

ALWAYS includes: necessities (food, shelter, clothing, and medical care) and reasonable amounts for child support

Question 22

What is an indication of a general charitable intent?

Answer 22

The absence of a reverter clause (that property will go to another beneficiary in event that property cannot be used for charitable purpose)

Question 23

What is a spendthrift trust?

Answer 23

Provision in a trust preventing the transfer of a beneficiary’s interest