Kinds of Trusts

Question 1

What is a pourover will?

Answer 1

A will that makes a gift to a trust

Question 2

When is a pourover will valid?

Answer 2

When the will makes a gift to a trust and the trust is identified in the will and the terms are incorporated into the will before or concurrently with the execution of the will .

Question 3

What is the modern approach to amendments to trusts in a pourover will?

Answer 3

Under the UPC, an amendment made after the execution of the will is valid and will govern what is bequeathed to a trust.

Question 4

What is common law approach to amendments to trusts in a pourover will.

Answer 4

The court will ignore any amendments.

Question 5

When happens when a will makes a gift to a trust and the trust terminates prior to the testator’s death?

Answer 5

The gift fails.

Question 6

What are discretionary trusts?

Answer 6

The settlor gives the trustee discretion to decide when to make a distribution to a beneficiary.

Question 7

What are the rights of a beneficiary in a discretionary trust?

Answer 7

The beneficiary cannot demand any part of the income or principal and cannot ask the court to compel a distribution unless the trustee abuses their discretion.

Question 8

When is there abuse of discretionary by a trust in a discretionary trust?

Answer 8

When there is dishonesty or an improper motive.

Question 9

What are the rights of creditors in a discretionary trust?

Answer 9

A creditor cannot compel a distribution unless it shows that the trustee acted dishonestly or in a state of mind not contemplated by the settlor. There is an exception under the UTC for child support and alimony.

Question 10

What is a support trust?

Answer 10

The settlor instructs the trustee to pay what is necessary for the beneficiary’s support.

Question 11

What is support for the meaning of a support trust?

Answer 11

Support includes more than necessities or bare essentials. Most courts measure support in terms of the lifestyle to which the beneficiary has become accustomed to, determined at the time the trust interest was created

Question 12

What is a pure support trust?

Answer 12

A pure support trust is a trust under which payments are limited for a beneficiary’s support.

Question 13

In a pure support trust, what are the trustee’s rights?

Answer 13

It has no discretion to withhold payments of income that are necessary for the support of the beneficiary, however it may have discretion to determine whether a payment is necessary.

Question 14

What is a discretionary support trust?

Answer 14

A discretionary support trust is a trust under which a trustee has discretion to withhold payments of trust property from a beneficiary who has a support need.

Question 15

What is a spend thrift trust?

Answer 15

It restrains both voluntary and involuntary transfer of a beneficiary’s interest.

Question 16

What are the rights of a creditor in a spend thrift trust?

Answer 16

a beneficiary’s creditor may not reach part of the distribution unless they are a favored exception.

Question 17

What is a favored creditor?

Answer 17

Creditors that may reach an interest by garnishment or attachment but are only limited to get what a beneficiary would get.

Question 18

Who is a favored creditor?

Answer 18

Child or spousal support. a judgement creditor who has provided services for the protection of a beneficiary’s interest in the trust, the state or U.S., and creditors that furnished necessaries.

Question 19

Who is a non-favored creditor?

Answer 19

Creditors that are not favored. They are not reach any disbursement until the money is actually transferred.

Question 20

What happens if a trust does not comply with terms of a spendthrift?

Answer 20

Under the UTC a claimant can compel a distribution to the extent that the trustee has abused its discretion or failed to comply with a standard for distribution.

Question 21

What is a self-settled trust or self-declaration trust?

Answer 21

When the settlor of a trust is also a beneficiary of a trust.

Question 22

If a settlor of a trust is also a beneficiary, what are the creditors entitled to?

Answer 22

Entitled to the maximum amount that could be distributed from the trust to the settlor. Many states provide that the creditors of a revocable trust can reach trust assets in satisfaction of their claims.

Question 23

What is a charitable trust?

Answer 23

A trust that is created for the relief of poverty, or the promotion of education, religion, health, scientific, literary, benevolent, governmental purposes etc.

Question 24

When may a charitable trust fail?

Answer 24

If a charitable purpose becomes unlawful, impracticable or impossible to achieve.

Question 25

What is the cy pres doctrine?

Answer 25

If the settlor had a general charitable intent, a court may substitute another charity that approximates the settlor’s original purpose if the original purpose becomes unlawful, impracticable, or impossible to achieve.