Wills MEE

Question 1

What is a trust?

Answer 1

A trust is a financial relationship where one person holds property at the request of another. The Trustee holds “legal title” and the beneficiary holds “equitable title” and gets the financial benefits.

Question 2

UTC

Answer 2

The uniform trust code has been adopted in 35 states.

Question 3

Express Trust (most common)

Answer 3

Created with the intention and by complying with certain formalities.

Question 4

Implied Trust

Answer 4

aka a “Constructive Trust”
Courts are creating this because someone did something unfair and are looking at actions over words.

Question 5

How do you create a trust? (big things)

Answer 5

(“BIT BY BIT”)
B: Beneficiary (can be incompetent)

I: Intent (no magic words are necessary. Rather, looking at present intent to create one. “tenor” of your words and actions

T: Transfer of Property (“res”) anything that can be owned or transferred

Question 6

How do you create a trust? (little things)

Answer 6

Delivery + Acceptance

Trustee Named - trust won’t fail without one

Settlor needs: mental & legal capacity

Question 7

A woman goes to a bank, opens a new special account, and said she wanted to “set aside” money for her son. After establishing the trust, she withdrew from it for personal reasons on a few occasions. she Is this enough to establish a trust?

Answer 7

Not enough for a trust. Had she named it “Walters Trust” or something like that, then maybe. Furthermore, because she withdrew out of it, that also cuts against a trust.

Question 8

Precatory Language

Answer 8

Unclear language that does not clearly evidence the intent to create a trust.

Ex: “I wish X can use this for Y”
“I request X”

Question 9

Kinds of Beneficiaries

Answer 9

Natural persons, corporations, and other organizations.

CANNOT leave to a pet

Beneficiary CAN be mentally incompetent.

Question 10

Hypo: I create a trust for “my friends.” Explain.

Answer 10

Here, the beneficiaries are members of an indefinite class. The Trustee has no way to determine who they are.

Key Word: The beneficiary needs to be “ascertainable.”

Question 11

Valid Trust Purpose

Answer 11

Anything that is legal.

Question 12

What happens if a trust has real property

Answer 12

Must comply with the SoF

Question 13

Mandatory Trust

Answer 13

Trustee must give out a certain amount of $ or % of every year or month.

Question 14

Why would I want a discretionary trust?

Answer 14

To protect the beneficiaries from themselves.

Question 15

Spendthrift Trusts

Answer 15

Spendthrift trusts disallow voluntary and involuntary transfers and cannot be traded on, cashed in, or used as collateral.

Creditors, liens, etc. cannot be levied against a proper spendthrift trust.

Question 16

When can creditors still get to your spendthrift?

Answer 16

1. Child Support
2. Felony criminal offense where the victim is physically injured
3. Once $ is distributed. Crediotrs have no more rights than the beneficiary in the money. But, once the money becomes the beneficiaries, the creditors have the rights to take it.
4. Necessaries provided to you like food, shelter, clothing.

Question 17

Can creditors attach their claim to future interests?

Answer 17

Oh ya. But the creditor cannot compel or pressure the Trustee to make a distribution.

Question 18

How do you create a spendthrift trust?

Answer 18

With the magic word: “spendthrift”

Question 19

What happens if I create a trust and don’t put any assets in it?

Answer 19

A trust that is invalid for lack of assets can be funded later as long as the settlor is manifesting an intent to actually get the trust rolling again.

Ex: guy deposits check into trust account and memo’d it “for the trust”

Question 20

Testamentary Trust

Answer 20

Creating a trust through a will. The will must state:
1. essential terms
2. Intent can be found from other documents [incorporation by reference]

Question 21

Pour Over Trust

Answer 21

Testamentary trust but the trust is already created and the will just allocates assets into the trust.

• If the Settlor changes the terms of the trust after the will is drafted, it is still allowed.

Question 22

Charitable Trust

Answer 22

One that accomplishes a social benefit to the public at large or to a reasonably large class.

Question 23

Cy Pres

Answer 23

When the Settlor exhibits a general intent to give to charity and provides no means to revert if the gift fails then the court is going to use Cy Pres to try and save the gift and get as close as possible to what the Settlor wanted.

Question 24

Revocability of Trusts

Answer 24

Common law: Presumed irrevocable unless you reserve a right, in the trust, to revoke it.

UPC: Presumed revocable unless the trust expressly says otherwise.

Question 25

Where to find the trustee’s duties?

Answer 25

In the trust itself.

If the duties described in the trust aren’t enough, then we fall back to the UTC baseline duty rules.

Question 26

Can Trustee’s liability be limited in the words of the trust?

Answer 26

No

Question 27

Trustees Duty of Good Faith

Answer 27

1. No loans, no sales
2. Keep records and maintain proper accounting
3. Be a prudent administrator (you must invest wisely. Diversify. Presumption that a lack of diversification of assets is not prudent)
4. Loyalty (UTC says if you have an interest/stock in its a presumptive breach)

Question 28

No Further Inquiry Rule

Answer 28

UTC sought to remove all temptation from Trustee’s to breach their duty of loyalty. As such, any transactions poisoned by a conflict of interest and can be liable to the beneficiaries.

Question 29

Duty of Care

Answer 29

Carrying out the directives of the Trust and protecting the assets.

Question 30

Duty of Impartiality

Answer 30

UTC requires trustees to distribute trust assets free from animosity or favoritism.

Question 31

Unanimous Agreement Termination

Answer 31

The Settlor and all the beneficiaries vote to abolish the trust.

Question 32

Unanimous Agreement Termination (when Settlor is dead)

Answer 32

The Court attempts to make a judgment on behalf of the Settlor. If the Court determines that the material purpose of the trust has been achieved, then the vote will go through.

If no material purpose can be deduced, the Court will just assume it was for the benefit of the beneficiaries and distribute it.

Question 33

Once a trust is terminated, how does the Trustee distribute?

Answer 33

In a way that is consistent with the purposes and goals of the trust.

Question 34

Power of Appointment