Ch 1: Introduction to Trusts Flashcards
(28 cards)
What is a trust? (T)
A trust is a fiduciary relationship in which one or more trustees are called upon to manage, protect, and invest certain property and any income generated from it for the benefit of one or more named beneficiaries.
How can a grantor create a trust? (T)
To create a trust, the settlor must intend to create the trust.
What does it mean that trusts are alienable? (T)
Trust interests are alienable (i.e., transferrable during life, by will, or by intestacy), unless the terms of the trust expressly or impliedly provide otherwise.
What trust require to be valid? (T)
A valid trust requires a trustee, an ascertainable beneficiary, and assets.
What are the three main types of trusts? (T)
There are three main types of trusts: express trusts, resulting trusts, and constructive trusts.
What is a bifurcated transfer? (T)
The creator or settlor transfers property to a trustee to be managed for the benefit of a third-party beneficiary. The trustee holds legal title, and the beneficiary holds equitable title. No consideration is required.
What is the majority rule regarding trusts being revocable? (T)
A trust is presumed to be revocable unless it expressly states that it is irrevocable.
What is an exam tip for revocable v. irrevocable trusts? (T)
If this issue arises in an essay question, unless the question explicitly directs you to apply either the majority or UTC rule, you should mention both presumptions in your rule statement, but apply the majority rule in your analysis.
Regarding trusts, what is a trustee? (T)
A trustee is the holder of the legal interest in or title to the trust property.
What are the responsibilities of a trustee? (T)
The trustee manages, protects, and invests certain property (and any income generated therefrom) for the benefit of one or more named beneficiaries.
What kind of device is a trust? (T)
A trust is a management device.
In a trust, who holds what titles? (T)
In a trust, the trustee owns the legal title and the beneficiary owns the equitable title.
How is trust property divided? (T)
Trust property is divided between principal (i.e., original trust property and any increase in value) and income (i.e., money generated by trust property).
Regarding trusts, what is the principle? (T)
The principle is the original trust property and the increases in value.
Regarding trusts, what is income? (T)
Income is money generated by trust property/invested by the trust.
When can revocable trusts be revoked? (T)
Revocable trusts can be revoked any time during the settlor’s life.
Can irrevocable trusts be revoked? (T)
No.
What is the presumption of trusts under the traditional rule? (T)
Under the traditional rule, a trust is presumed to be irrevocable unless the trust documents say otherwise.
What is the presumption of trusts under the UTC/majority rule? (T)
Under the UTC/majority rule, a trust is revocable unless the trust documents say otherwise.
What happens under a mandatory trust? (T)
Under a mandatory trust, the trustee must make distributions from the trust.
What happens under a discretionary trust? (T)
Under a discretionary trust, the trustee may make distributions in her discretion.
What happens under a remedial trust? (T)
A remedial (passive) trust is a remedy created by operation of law in which the trustee only has the power to transfer the property.
Will a trust fail for lack of a trustee? (T)
No. A trust will not fail for lack of a trustee.
Who can be a trustee? (T)
A trustee can be an individual, a bank, or a trust company.
