FL statutes on Trust

Question 1

Elements of a trust

Answer 1

1. Present intent to create a trust
2. settlor (over 18, legal capacity)
3. trustee
4. trust res and delivery
5. acertainable beneficiaires
6. valid, legal purpose

Question 2

If the trust res is real property or in will, what additional requirement is needed?

Answer 2

trust must be in writing and comply with the will formalities - two witnesses, etc.

Question 3

Precatory Language

Answer 3

Non-binding language that’s insufficient to create a trust
ex. “It’s my desire that,” “whenever possible,

needs language that’s definite and specific

Question 3

Are trusts presumptively revocable or irrevocable?

Answer 3

unless it says expressly, it’s revocable

Question 4

What is a spendthrift provision?

Answer 4

prohibits voluntary or involuntary transfer of a beneficiary interest
* the provision intends that the beneficiary can’t get at the interests

Question 5

What does a spendthrift clause protect?

Answer 5

Protects the interests from creditors
* creditors can’t reach the assets until they’re distributed to beneficiary and lose their trust status

Question 6

How can a beneficiary access the interests in a trust with a spendthrift clause?
(3 exceptions to the rule interests aren’t reachable)

Answer 6

(1) beneficiary’s child/spouse/former spouse with a court order can get to trust assets for support and maintenance
(2) state and federal government
(3) judgment creditor who provided services for the benefit of the trust

(these are considered last resorts)

Question 7

Name the 3 types of trusts

Answer 7

(1) Charitable trust
(2) discretionary trust
(3) pour-over trust

Question 8

What are the characteristics of a charitable trust?

Answer 8

• no ascertainable beneficiaries - created for a general cause
• gift may say charitable org, benefiting public, etc.
• may be perpetual, not subject to the rule against perpetuities

Question 9

Under a charitable trust, what rights do a charitable organization have?

Answer 9

The charitable organization is a qualified beneficiary under the trust and can enforce the trust

Question 10

Aside from the charitable organization, else has the power to enforce the trust?

Answer 10

The settlor and the Attorney General

Question 11

what is the cy pres doctrine?

Answer 11

legal principle that allows courts to redirect charitable gifts to a new beneficiary when the original purpose is no longer possible

• as long as the change reflects the settlor’s intent

Question 12

what are the characteristics of a discretionary trust?

Answer 12

• trustee has broad discretion
• beneficiaries can’t direct the trustee
• language like “at the sole discretion of the trustee”
• all decisions must be made in accordance with the settlor’s intent
  
  • if the trustee discretion is unfettered, creditors can’t be reached

Question 13

what are the characteristics of a pourover trust?

Answer 13

• it’s a gift to intervivos trust in the will - contents of the will pours over into the trust upon probate

Question 14

what are elements of a pourover trust

Answer 14

(1) trust must’ve been created before or at the time of the will
(2) must be identified in the will
(3) trust terms must be in writing

Question 15

when is a pourover trust funded?

Answer 15

Can, but does not have to be funded during the lifetime; can be amended after its creation

Question 16

What are qualifications to be a trustee?

Answer 16

18+ and competent to acquire/control/hold property
* can be a bank as long as bank charter gives it the power to act as trustee

Question 17

Trustee duties -
what does it mean to be a prudent investor?

Answer 17

be conservative, preserving assets, diversifying assets

Question 18

Trustee Duties -
what is a duty of loyalty?

Answer 18

• no self-dealing
• no transactions that trustee enters into on behalf of the trust can be in his own personal gain
• trustee must act in the best interest of the beneficiaries, follow the intent of the settlor, but not benefit from it personally

Question 19

Trustee duties
Duty of loyalty cont’d -
What would happen if the trustee did enter into a transaction on behalf of the beneficiaries from which he personally benefited?

Answer 19

The transaction would be voidable per se - or presumptively voidable where trustee’s action was a conflict of interest

Question 20

Trustee Duties
What is the duty to earmark?

Answer 20

must label property as trust property; no commingling assets between own account and trust

Question 21

Trustee Duties
What is the duty to inform?

Answer 21

must keep beneficiaries reasonably informed of trust administration
- accounting - at least 1 year

• normally should not delgate duties but can in situations where delegatee is qualified and trustee manages performance - if a reasonable trustee would say this is too sophisticated, etc

Question 22

Trustee Duties
What is a duty of impartiality

Answer 22

Trustee must treat all beneficaries equally

ex. trustee puts assets into bonds to maximize income for income beneficiaries at the expense of the principal that will eventually be enjoyed by holder of future interest. He’s violated a duty of impartiality.

Question 23

Duty of Trustees-
What is the duty of administration?

Answer 23

It’s the duty of care and good faith and use all skills and expertise that she may possess
- according to the terms fo the trust and interests of the beneficiaries

Question 24

Other duties/powers of trustee

Answer 24

* broad power to sell, lease, invest, mortgage, insure, repair, or pay all claims against property without court approval * trustee can earn reasonable compensation based on work and reasonable expenses * trustee can be a beneficiary - just can't be the sole beneficiary

Question 25

How does it work with co-trustees?

Answer 25

* make unanimous decisions, but if not, majority rules. - if one can't act, remaining can act on his behalf, of and to the benefit of the trust - can delegate duties among trustees only for functions the settlor didn't reasonably expect trustees to perform jointly

Question 26

How can a trustee resign?

Answer 26

by giving notice of intent to resign - 30 days notice to settlor if living, or to beneficiaries if not, or to court

Question 27

How can a trustee be removed?

Answer 27

3 ways: (1) breach of trust (2) trustee unfit (3) trustee's incapacity * Florida's courts hae jurisdiction - can do it on its own or through by settlor or beneficiary or co-trustee

Question 28

vacancy of co-trustee

Answer 28

doesn't need to be filled unless (1) there is no other trustee Otherwise remaining or majority of co- trustees can act

Question 29

What are the remedies for a trustee's breach of his duties?

Answer 29

Either ratify trustee's actions or sue for surcharge for the full amount of the loss - like a bad investment, etc.

Question 30

What are the two ways to terminate or modify a trust?

Answer 30

(1) court involvement (2) non-judicial involvement

Question 31

Why would a trust be terminated?

Answer 31

When the trust purpose is fulfilled or impractical, illegal impossible or * it's in the best interests of the beneficiaries

Question 32

How can you terminate or modify an irrevocable trust

Answer 32

Before 2001, irrevocable trusts could only be modified or terminated by a court -- court could do it on their own, with a petition from a qualified beneficiary or trustee for the reasons already listed After 2001, when trustees and beneficiaries agree - trust no longer serves material purpose = unless a trust expressly prohibits it