Trusts basics

Question 1

Methods of creating a trust

Answer 1

3 ways:

1. Transfer/devise
2. Declaration
3. Appointment

Question 2

Creating a trust by transfer

Answer 2

Settlor transfers funds to 3rd party

By will = testamentary

By other = inter vivos

Question 3

Creating a trust by declaration

Answer 3

Settlor declares himself trustee of trust assets

Self-declared trust

Question 4

Creating a trust by appointment

Answer 4

A holder of a power of appointment can create a trust by exercising the power.

Testamentary trust: create trust by will

Question 5

Presumption of revocability

Answer 5

Under Common law, if trust did NOT expressly state whether revocable, trust presumed irrevocable

Under FTC, if trust does NOT expressly state whether revocable, trust presumed revocable

Under Restatement

• IF settlor retains some interest – presumed revocable
• IF settlor retains NO interest – presumed irrevocable

Question 6

Which law governs a trust?

Answer 6

Settlor may choose § 736.0107

IF Florida resident does not expressly indicate another jurisdiction, Florida law governs § 736.0107

Question 7

Principal & Income Act

Answer 7

Provides trustees with broad power to make adjustments between income and principal. This allows a trustee to invest for total return and supplement the income of a low yielding portfolio with principal (even if discretionary principal distributions are not allowed by the trust document).

Question 8

Prudent Investor Rule

Answer 8

The trustee is expected to establish an investment policy that appropriately balances the risk and return objectives for the entire portfolio of assets owned by the trust.

Question 9

Can I revoke my trust by will?

Answer 9

Yes; Must revoke by substantial compliance to method in trust

If trust does not provide a method, by a later will or codicil that specifically mentions trust

Or any other method manifesting clear and convincing evidence of settlor’s intent