Wills and Trusts Bar Flashcards

Question

Listen to some notes on holographic will

Answer 1

Crossing out an item by handwriting (e.g., drawing an X on a disposition to someone) and supplying a signature Handwritten changes 1. Made to a holographic will: Given affect 2. Made to an attested will: Not given affect and may work a revocation Note 1. Oral wills are never allowed

Answer 2

A pour over will is created when a testator provides that the residuary or left over of his assets will be poured into the trust. The property goes into the trust on the date of the testator's death, not the date when the will was written. Requirements (1) Trust identified in testator's will; AND (2) Written instrument exists containing trust terms, that was made before or concurrently with the will.

Answer 3

A validly executed codicil operates as a republication of the will as of the date on the codicil. Conclusion: The will is republished to 2012.

Answer 4

(1) Integration (2) Incorporation by reference (3) California special rule for limited tangible personal property (4) Acts of independent legal significance

Answer 5

A document will be integrated into the will if: (1) Testator had an intent to incorporate the document; AND (2) The document was physically present at the time the will was executed.

Answer 6

Incorporation by reference occurs when: (1) Testator intended to incorporate the document by reference; (2) The document was in existence at the time the will was executed; AND (3) The document is sufficiently described in the will.

Answer 7

A list of items will be admitted into probate if: (1) The will refers to the list; (2) The list is dated; (3) The list is handwritten or signed; (4) The list describes the property and beneficiary with sufficient certainty; AND (5) The entire list does not exceed $25K in value and one item does not exceed $5K in value

Answer 8

A will may identify beneficiaries or dispose of property by reference to acts that have independent significance. Note: Applies whether events occur before or after will execution or after T’s death Example: Marriage; identifying who employees are in a class gift; identifying which car to leave Rachel in “I leave my car to Rachel” and event is buying of BMW later; referencing newspaper clippings EXAM TIP – Issue spotting 1. Anytime you issue spot integration, also run incorporation by reference and acts of independent significance.

Answer 9

A person with testamentary capacity may revoke their will at anytime prior to their death.

Answer 10

(1) By subsequent written instrument (2) By physical act (3) By operation of law

Answer 11

A will may be revoked in whole or in part by a subsequent written instrument. The two documents are read as a single instrument. Where there are inconsistencies, the latest instrument will control.

Answer 12

1. Rule: A will/codicil or part of one can be revoked by a physical act (e.g., by cancellation where lines are drawn through a codicil). The testator’s intention to revoke must be concurrent with the physical act.  Note: Increasing a gift on its own is not OK unless to a residuary. 2. Duplicates  Revocation by physical act revokes all duplicates. 3. Codicil - Physical destruction of codicil does not revoke will, even if T intended - Physical destruction of will revokes codicil, unless T did not intent to - When will and codicil on same paper, defacing will revokes codicil but not other way around, unless T intended

Answer 13

 Subsequent will or codicil  Adding an unintentionally omitted spouse  Removing all devises to previous spouse after divorce.  Look to see if a codicil was created as it republishes the will as of that date and thus the spouse or child would no longer be omitted.

Answer 14

(1) If will found at death in normal place with no suspicious circumstances, will not revoked (2) If will never found, presumed destroyed with intent to revoke

Answer 15

A DRR cancels the revocation of a prior will where the revocation was based on a mistake. The DRR only revokes the most recent instrument. The more similar the wills, the more likely the court is to revive the first one. Parole evidence is allowed. Conclusion: The first will is revoked. The subsequent one is voided.

Answer 16

Where an initial will is revoked, and the subsequent will is revoked by physical act, the first will is revived if this is what the testator intended.

Answer 17

1. SP  Rule: A married person is entitled to dispose of their separate property as death as they wish. 2. Devise: Gift of real property 3. Bequest: Gift of personal property

Answer 18

(1) Specific (2) General (3) Demonstrative (4) Residual

Answer 19

A specific gift is a gift of particular, identifiable property. Such gifts may adeem is no longer available at the time of the testator's death. Examples: My diamond earrings, my cottage in Malibu, my ABC stocks Note: A specific gift may be of general nature. Example: "I leave my computer to Walter."

Answer 20

A general gift is a gift from the general assets that is not required to be funded from a particular source. Such gifts should typically do not adeem. Example: 100 shares of ABC stock

Answer 21

 Defined: A demonstrative gift is a gift of a specified amount of money that is directed to be paid from a particular source.  Impact: These gifts generally should not adeem.  Example: “I leave Bill $500 from my BofA account.”  Note: If designated fund is insufficient, balance will be paid from other assets of the estate.

Answer 22

A residuary gift is whatever remains of the estate after all the debts and taxes are satisfied and the gifts have been distributed. Example: I leave whatever is left-over to Bill.

Answer 23

Distribute in the following order of priority (1) Specific gifts (2) General and demonstrative gifts (3) Residuary EXAM TIP  Argue both ways whether a gift can be specific or general and discuss T’s intent, even if you must make inferences to do so.

Answer 24

Ademption provides that where a specific gifts no longer exists at the time of the testator's death, the gift fails and the purported devisee takes nothing. Note: ONLY applies to specific gifts.

Answer 25

Person can receive money in exchange for the specific gift if: (1) Balance of a purchase price from a purchaser who owes money to the T (2) Proceeds from foreclosure or eminent domain (3) Proceeds from a sale by a conservator or guardian

Answer 26

A gift adeems by satisfaction where (1) Testator or beneficiary declare in writing at the time of the gift that the gift is satisfied, OR (2) The same property is given to the beneficiary during his lifetime.

Answer 27

Abatement occurs where there are insufficient funds in an estate to pay all of the legacies in full. The legacies must abate in reverse order of distribution. The gifts are reduced proportionately within a certain category.

Answer 28

To satisfy claims, the personal rep uses: (1) Any property not disposed of in the will (2) The residuary (3) General/demonstrative gifts to non relatives (4) General/demonstrative gifts to relatives (5) Specific gifts to non relatives (6) Specific gifts to relatives (the strongest; least likely to get taken away to pay estate expenses).

Answer 29

Example: Omitted child. He is not in will. No surviving spouse. 2 other children but they are in will. Absent a will for a certain individual, apply intestate. Under intestate, children take first, so each child gets 1/3 share. After intestate share calculated, other two children take under the will. In abating shares to pay for the claim of a pretermitted child the other beneficiaries will have their benefit reduced in proportion to the value they receive. We do not go intestate for people in the will, because there is direction in a will. People in the will are going to have their gifts abated down to fund the intestate share.

Answer 30

In CA, liens on devised property are not exonerated (e.g., first paid off with estate funds before distributed).

Answer 31

Lapse occurs where the beneficiary predeceases the testator. The gift lapses and falls into the residual. If there is no residual, the gifts falls into intestacy. Note: Deceased class member gifts lapse.

Answer 32

Under California's anti lapse statute, the gift passes to the predeceased beneficiary's heir. The statute only applies if the predeceased beneficiary was a blood relative of either the testator or the testator's spouse, former spouse, or deceased spouse. The Anti Lapse Statute Also Applies to Trusts: Where it lapses, it falls into residuary, look to will to see who gets residuary Notes * Anti lapse does not apply to residuary gifts when other beneficiaries remain. Remaining residuary devisees will take the gift of deceased beneficiary. * Example: Where residual passes to A, B, and C (all are friends), and A dies, A’s portion goes to B and C.

Answer 33

A testator may make a gift to a class of unascertainable beneficiaries so long as the class is capable of being ascertained at the testator's death and at which time the class will be closed. Only class members who survive the T take unless anti-lapse applies

Answer 34

By 120 hours. Otherwise, treat the heir as predeceased. Exception - where application of the rule would result in property escheating to state

Answer 35

By an instant Where both the testator and the beneficiary die around the same time and it is unclear who died first, the beneficiary is deemed to have lapsed first and so anti lapse may apply

Answer 36

adopted children treated as regular children children born out of wedlock also treated as regular children so long as evidence established parent child relationship

Answer 37

Adoption severs the parent relationship with the birth parents unless: (1) Spouse of natural parent adopts child; AND (2) Adopted child and natural parent lived together for any time.

Answer 38

Under intestate succession, step and foster children have no relationship unless: (1) Relationship began during child's minority; (2) Relationship continued through lifetime; AND (3) A legal barrier prevented adoption.

Answer 39

 If after executing will couple divorces, any references to ex-spouse omitted

Answer 40

If a person dies intestate, property the decedent gave to an heir during lifetime is treated as an advancement against that heir's share of intestate estate if: (1) Decedent declared so; AND (2) Heir acknowledged in writing.

Answer 41

where any property is not disposed of by will or someone is missing in a will or there is no will

Answer 42

Any property that does not pass by will upon decedent's death will be distributed according to intestacy statutes. In CA, ex-spouses do not take any portion. Children take per capita, equally. Omitted spouses and children take their share of intestate BEFORE the will assets are distributed.

Answer 43

Under intestate, surviving spouse takes all of decedent spouse's CP or QCP.

Answer 44

100% of the SP Applies where: No surviving descendant, no parents, no siblings, and no descendants of a deceased sibling

Answer 45

When the decedent is survived by either: - One child - Deceased child's descendant - No descendants, but a parent or descendants of a parent

Answer 46

When the decedent is survived by either: - More than one child - One child plus a deceased child's descendants - Descendants of two or more deceased children

Answer 47

divide shares equally

Answer 48

the decedent's parents inherit equally. if no surviving parents the descendants of the decedent’s parents will inherit the estate (i.e., decedent’s brothers/sisters, nieces/nephews, and their descendants down the line).

Answer 49

(1) Strict (2) Per capita at each generation (3) Per capita with representation (modern rule)

Answer 50

* All descendants of Same Degree of Relationship: If the surviving descendants are of equal degree of kinship to the decedent (for example, all children or all grandchildren), each receives an equal or per capita share. A descendant in a younger generation (for example, a grandchild) cannot take if an older generation is still alive.

Answer 51

Under the per capita at each generation, people at each generation are treated equally. Assets are handed out at the first generation where someone is alive. Where someone at the first generation is not alive, the assets are pooled together and distributed evenly to the subsequent generation.

Answer 52

Under the per capita with representation approach, each person at a generation is not treated equally. Assets are distributed equally at the first generation were someone is living. Where someone is deceased, that share drops down to the next person in line under the decedent. If no one is available in the subsequent line, the assets are added to the original distribution.

Answer 53

PDGD Parents Descendants of parents Grand parents Descendants of grand parents Descendant of predeceased spouse (e.g., step-child) Next of kin (more distant relatives) Parents of predeceased spouse and their descendants Escheat to state

Answer 54

Where a decedent spouse attempted to dispose of more than his fair share of the CP, the wife can elect to take under the will or her statutory share.

Answer 55

If a decedent, prior to his death, transfers their QCP to a third party for less than substantial consideration, without their spouse's consent, and reserves a right to survivorship, a right to revoke, or an income right, upon the decedent's death, the surviving spouse can claw back a one-half interest in the property. The remaining half interest remains with the third party. NOTE * Tenancy in Common—No Survivorship Rights: The decedent’s share passes via the decedent’s will or under intestacy. There are no survivorship rights; thus probate is not avoided.

Answer 56

 Example: H gives QCP land to himself and to his daughter as a gift and as joint tenants (this means JTROS). W did not consent. At H’s death, W can compel daughter to restore one-half of property to H’s estate. If the land is worth $100K, W gets $50K, which is her decedent spouse’s interest. * Treatment of the other half interest: The other half interest remains with the third party. Thus, if H had not performed the transfer, and had not disposed of it in his will, W would have received the full property. However, H altered the ownership and adversely affected W’s rights to the land. Thus, W ends up with 50% and the third party ends up with 50%. * Note: Isolate the house as an intervivos transfer. ½ belonged to H. ½ belonged to third party. W claws back H’s ½. Third party keeps half. Also, segregate from will provisions concerning CP. Do not think that because it is CP we extend it to children in will you are given some portion of CP. This was an intervivos transfer.

Answer 57

A spouse who is omitted from a premarital will receive an intestate share of the decedent's CP along with up to half the SP unless: (1) Omission intentional on face of will (2) Spouse otherwise provided for by transfers outside of the will (3) Spouse waived her right in writing (4) Spouse was care custodian, marriage began while spouse was providing services or within 90 days of service ending and decedent died less than 6 months after marriage began

Answer 58

Born before the will was created Born after the will was created

Answer 59

Child will receive his intestate share unless (1) Omission intentional on face (2) Child provided for outside of will with other transfers (3) Decedent has other children and substantially all of assets DEVISED to omitted child's parent, Note: Giving surviving spouse an intestate share is not a devise or transfer.

Answer 60

He will not receive an intestate share unless: (1) Father did not know about child's existence; AND (2) Court satisfied evidence proves parent child relationship  NOTE: Rule above applies to adopted children. Also note that the timing for adopted child is timing of adoption, not of their birth. 3. Exam Tip  Republication by codicil can change child status. A child born before the republication is not considered omitted and is not entitled to protection.

Answer 61

A person who feloniously and intentionally kills the decedent is not entitled to be an heir in any way. Note: Negligence resulting in homicide is insufficient.  Includes by will, trust, intestacy, insurance, joint tenancy, or otherwise.

Answer 62

(1) Didn't acknowledge child (2) Parents rights terminated (3) Abandoned child for at least 7 consecutive years

Answer 63

A person found liable by clear and convincing evidence of elder abuse will be treated as though he predeceased the decedent. This includes physical abuse, neglect, and fiduciary abuse.

Answer 64

A No Contest Clause penalizes a beneficiary if he contests the instrument. Such clauses are enforced unless the beneficiary has probable cause to support the contest.

Answer 65

- Contracts to make wills can take numerous forms. The most common types of contracts related to wills are: 1. A contract to make a gift by will; 2. Joint or mutual wills that may or may not be contractual; 3. A contract not to revoke a will or a provision included in the will; and 4. A contract not to make a will at all. - Contract law rather than wills law governs the outcome of many disputes. Additionally, the contract associated with the will is separate from the will itself. The will is valid and may be probated, provided it was executed with the requisite formalities, even if its execution was in breach of contract. - Breach of Contract 1. If first party to contract dies in breach, courts will deny a remedy because other party has not been harmed, because party can still change their will. 2. If second T dies in breach, injured beneficiaries sue to impose constructive trust.

Answer 66

A trust is a fiduciary relationship in respect of property. The settlor gives a trustee the right to hold legal title subject to fiduciary duties, for the benefits of certain beneficiaries, who have equitable rights in the property.

Answer 67

The same person cannot be the sole trustee and the sole beneficiary.

Answer 68

Yes so long as there are more beneficiaries at death. Note also that the settlor can also be the trustee. * “To be held in trust for 5 years for benefit of Bob” means that income from trust goes to Bob, he is income beneficiary, and whoever actual asset goes to later is the remainderman

Answer 69

In the case of a revocable trust, a trustee's duties are owed exclusively to the settlor, whereas under an irrevocable trust, the trustee's duties are owed solely to the beneficiaries.

Answer 70

No, unless the trustee has: (1) Court permission, or (2) Consent of all the beneficiaries

Answer 71

No, unless the power is expressly granted to them in the trust

Answer 72

4. Notes on Trust Property (Res)  Must be described with certainty 5. Notes on Beneficiaries  Holds equitable title  Must be capable of taking and holding title to property  Notice not required but beneficiary must accept; acceptance is presumed

Answer 73

Almost everything earned by the principal of the trust is income. Stock dividends, interest earned on bank accounts or bonds, rents from real estate owned by the trust, and earnings received from a business the trust owns all constitute income of the trust. The largest exception to the income/principal distinction is how you classify capital gains and losses. Capital gains occur when you sell a piece of property for more than your acquisition cost. Capital losses, on the other hand, are what you get when you sell property for less than your acquisition cost. Whether the trust generates gains or losses, those gains and losses stay on the principal side of the trust.

Answer 74

A trust for real property must be in writing and signed by the settlor, trustee, or authorized agent.

Answer 75

No, the existence of an oral trust for personal property may be established by clear and convincing evidence

Answer 76

For 21 years following the testator's death regardless of the terms of the trust

Answer 77

A power of appointment is a right the settlor gives to another to direct the disposition of property. There are two types of power of appointment - a general power of appointment and a specific power of appointment.

Answer 78

The donee can exercise a power of appointment in favor of an unlimited class  Example: H tells W, “You can pick who gets my car.” W is not limited to anyone.

Answer 79

A donee can exercise a power of appointment over a limited class  Example: H tells W, “You can choose between our 2 sons to get the car.”

Answer 80

Intervivos trust (private) Testamentary trust

Answer 81

An intervivos trust is a private trust created during the settlor's lifetime. The trust requires: (1) The settlor's present intent to make a trust, requiring intent to split legal and equitable title; (2) A trustee, though the trust will not fail for lack of one because the court may appoint one; (3) Trust property (res); (4) Ascertainable beneficiaries (with the exception of a charitable trust or honorary trust), or a class where the class is reasonably definite; AND (5) A valid purpose (not unlawful or against public policy).

Answer 82

A resulting trust in favor of the settlor Note: Land trust requires SoF. Note: Settlor’s capacity required for trust is same as that of will.

Answer 83

A testamentary trust is created in the settlor's will. It will go through probate. 3 requirements: (1) Valid will; (2) Includes essential trust terms; AND (3) Trust must serve a lawful purpose. Note: If information missing, run integration and incorporation by reference

Answer 84

A secret trust is a gift made in a will but the will does not mention the facts of the trust. The promise is enforceable as a constructive trust in favor of the intended beneficiary. 2. Example: “I leave $5K to Stephen” is written in will. However, Testator secretly asked Stephen to hold the money in trust for Robert.

Answer 85

A semi-secret trust occurs where the trustee is named but the beneficiaries are secret/not listed. The trusts is unenforceable and the court will apply a resulting trust.

Answer 86

A pour over trust is created when the settlor makes gifts from the will to the trust during the settlor's lifetime. The trust must be clearly identified in the will. Property goes into the trust at the testator's death. The trust will go through probate. Notes i. Gifts valid even if unfunded during settlor’s lifetime

Answer 87

Generally, a beneficiary may voluntary transfer their interest. However, under a spendthrift trust, the beneficiary trust may not voluntarily or involuntarily transfer his interest (usually due to the beneficiary's lack of ability to effectively manage money and spending). The beneficiary does not have direct access to the funds and instead must wait until the trustee gives the beneficiary a payment. Creditors cannot reach the beneficiary until he receives an income payment. Also, the majority of jurisdictions provide that a settlor cannot create a spendthrift trust for himself in order to protect his assets. Exceptions Government creditors (taxes) Creditors for necessaries Alimony and child support Tort creditors

Answer 88

A support trust directs the trustee to only as much of the principal or income is necessary to support the beneficiary's health, education, maintenance, and support. The degree of payment is based on the beneficiary's standard of living that he was accustomed to. The beneficiary's interest is not assignable, and the interest of the beneficiary cannot be assigned or reached by creditors.

Answer 89

A discretionary trust gives the trustee discretion on when to pay the income or principal. The beneficiary has no right to payment unless the trustee abuses their discretion.

Answer 90

Before the trustee makes a payment, a beneficiary's interest is not assignable and cannot be reached by creditors. However, the creditors may attach themselves to the interest. If this occurs, the trustee if making a payment should first direct the payment to the creditors unless a spendthrift clause exists.

Answer 91

A charitable trust is one that is directed toward a charitable purpose (e.g., one that reduces poverty or relieves hunger) and has unascertained beneficiaries. RAP provides that an interest that does not vest within 21 years of the death of a life in being at the time of creation of the interest must fail. However, RAP does not apply to charitable trusts unless the trust becomes a private trust.

Answer 92

Cy pres is a doctrine of equitable approximation which provides that where a charitable trust fails (e.g., because the organization is no longer in existence), the court will substitute another charitable purpose to the trust, one that is as close as possible to the settlor's initial intent. The court must find that the settlor had general charitable intent. Notes 1. If charity petitions for cy pres right away before charity’s interest becomes due, the request should be denied, because it is premature. [They have a ‘future interest in the remainder of the trust’] 2. RAP does not apply, so a charitable trust can have unlimited duration

Answer 93

A honorary trust is not valid in that it lacks human beneficiaries, but the trustee can carry out the settlor's wishes to care for animals, maintain a grave, etc. Absent this, a resulting trust is imposed. Generally the trustee may not operate for more than 21 years in such a role.

Answer 94

A life insurance trust provides a contingency beneficiary in case the original beneficiary is not alive at the time the trust is in place. (e.g., “proceeds to A, but if A does not survive, to B in trust for my children”) Assignment of policy trust allowed (assign policy to party to hold in trust)

Answer 95

A totten trust is known as a payable on death account, a bank account for which the person who opens the account names a beneficiary. Upon the depositor's death, the money in the account goes directly to the beneficiary. The depositor is free to make withdrawals from the account during her lifetime and the depositor's creditors can reach the fund during the depositor's life.

Answer 96

A resulting trust is an implied-in-fact-trust based on the presumed intent of the parties. The resulting trustee will transfer property to the settlor if the settlor is alive, if not to the residuary, or to the heirs.

Answer 97

No listed beneficiary so trust failed Excess funds in the trust and no one listed to take it Purchase money resulting trust results where one party pays consideration but seller gives title to a trustee Charitable trust ends and cy pres doctrine is inapplicable Trust is illegal Semi secret trust Trust to help a business that doesn't exist anymore

Answer 98

A constructive trust is an equitable remedy to prevent unjust enrichment. 1. (1) Self-dealing or breach of fiduciary duties 2. (2) Fraud in the inducement or undue influence 3. (3) Secret trusts involved 4. (4) Oral real estate trusts created ii. P must be able to identify particular property as the trust res.

Answer 99

Rule: A gift causa mortis is a gift of personal property made in contemplation of death. While inter vivos gifts are typically irrevocable as soon as the donee accepts a gift, a gift causa motis can be revoked during the donor’s lifetime. The gift only becomes irrevocable at the donor’s death. b. Notes i. Cannot apply to gift of real property ii. Cannot be abstract fear iii. Revocable by operation of law if donor recovers from condition iv. Still valid even if donor dies of difference cause v. Subject to creditor claims on donor’s estate

Answer 100

Intervivos trusts presumed revocable. Can be terminated at any time.

Answer 101

Settlor can only terminate a irrevocable trust if all beneficiaries are in existence and agree.

Answer 102

No, trustee has no power to terminate the trust except as provided in the trust.

Answer 103

No, unless there is (1) unanimous consent; and (2) no material purpose yet to be performed CHAFLIN doctrine  Note: Includes unborn and unascertained bens, bens with future interests  Note: Includes unborn and unascertained bens, bens with future interests  Areas where material purpose yet to be performed * Support provisions * Spendthrift provisions * Payment at certain ages or on certain dates * Discretionary trusts

Answer 104

A court can modify or change the trust (upon petition by the trustee or beneficiary) upon changed circumstances or for other good reason (e.g., purpose of trust accomplished)

Answer 105

The trustee can exercise powers that are expressly or impliedly conferred.  Examples of implied powers * Sell or lease trust property * Incur reasonable expenses * Hire agents * Mortgage trust property * Repair * Courts split on whether borrowing money ok

Answer 106

A trustee owes a fiduciary duty to administer the trust solely in the interest of the beneficiaries.

Answer 107

The trustee must not self-deal (e.g., buying trust property for himself, borrowing trust funds). Where there is self dealing, the courts will apply the no inquiry rule. The trustee's good faith and the reasonableness of a transaction are not relevant.

Answer 108

A trustee owes a duty of undivided loyalty to the trust and its beneficiaries 4. Duty of Loyalty Examples  Cannot buy assets from or sell assets to the trust  Cannot borrow from trust or loan to trust  Cannot personally gain through position  Cannot use trust assets to secure personal loan  Corporate trustee cannot buy (but may retain) own stock  Treat all beneficiaries equally  Note: Settlor can waive self-dealing restrictions

Answer 109

Trustee must act as a reasonably prudent person managing their own property

Answer 110

Under the common law, the duty to invest requires the trustee to as a reasonably prudent person managing his property, trying to maximize income while protecting the corpus. Each investment is scrutinized. Under the Uniform Prudent Investor Act, adopted by most states, the trustee must invest as a prudent investor where each investment is evaluated not in isolation but in the context of a portfolio as a whole. Risky investments are permissible so long as on a whole the risk level is reasonable. must diversify stocks

Answer 111

- no commingling with own property or other trusts' property - commingled or lost property presumed to be trustees - if portion assets increases in value presumed to be trusts assets and if deceases assumes to be trustee assets

Answer 112

may not delegate administration may delete investment function but must monitor agent performance

Answer 113

ordinary expenses should be allocated to income and extraordinary expenses should be allocated to principal * Assets allocated to Principal [PLEAD] o Principal asset proceeds, life insurance proceeds, eminent domain awards, all property other than money, distribution of stock * Assets allocated to Income [RIM] o Rental income, interest, money

Answer 114

keep accurate records, render accountings to beneficiaries and court

Answer 115

deal with income beneficiaries and remaindermen equally

Answer 116

defend actions that may result in a loss to the trust enforce claims that are part of trust property

Answer 117

Recover profit Set aside transaction Ratify transaction Constructive trust Remove trustee

Answer 118

(1) Violating his trustee duties (2) Torts committed by him or agent if committed within scope of trustee's supervision of agent (3) Contracts made within the scope of trust supervision

Answer 119

- Remedies 1. Money Damages  Any losses resulting from breach  Any lost profit that would have accrued had it not been for breach  Any profit made by trustee in relation to breach 2. Other Remedies  Rule: When a trustee breaches his duties, the beneficiaries may seek to have the trustee removed from his role. The court decides whether to remove the trustee. 3. In case of self dealing  Affirm transaction  Set aside transaction  Trace profits from trustee if trustee profited

Answer 120

- beneficiaries consented - unclean hands - beneficiaries joined in breach - Removal of Trustee 1. Court must approve

Answer 121

- Transfer to a BFP 1. Rule: Transfer of property to a BFP. - Transfer to a third party who knowingly receives trust property will hold that property as a constructive trustee and will be liable for any losses to the trust (see Remedies outline) - Direct suits by beneficiaries is not permitted against third parties who damage trust property; only the trustee can sue. 1. Exception  Trustee participated in breach  Trustee left Jx  Trustee fails to sue third party liable in contract or tort

Answer 122

Unless a statute or the trust provides otherwise, the beneficiary's creditors may reach the beneficiary's interest in the trust. The interest is subject to judicial sale. To avoid this, a court may order the beneficiary's income to the creditors until debt satisfied  Ex. Revocable trust provides that all income will be paid to Andy for life, and on his death, the trust corpus will be distributed to Betsy  In absence of language in the trust to the contrary, which interest may be reached by Andy’s creditors? * The income interest in the trust. When Settlor puts money or other assets in the trust and reserves the right to revoke, creditors of the settlor can generally reach these assets. however, once the settlor dies and the trust becomes irrevocable, the creditors can no longer reach these assets. The interest is given to someone else for life, and the creditors cannot reach the trust res - Apply CP law rules for any CP or SP debts

Answer 123

- Trustee must administer trust impartially; must be fair to all beneficiaries - Unless the trust itself states otherwise, trust assets are allocated as follows: 1. Beneficiaries of a trust are entitled to income from interest income, cash dividends, and net business income, but must pay interest on any loan, debt, taxes, repairs. 2. Remaindermen of a trust are entitled to principal from the net proceeds on the sale of an asset, stock dividends, and profits from sale of stock, but must pay the principal part of the loan debt and for major repairs. 3. Subject to the trustee’s best judgement  The trustee can utilize his best judgment in carrying out the terms of the trust to follow the settlor’s intent even if this requires him to disregard the above rules and provide for a different allocation.