Kaplan Pgs 514-542 Flashcards
(38 cards)
What is a preferred claim with regard to a spendthrift trust?
Sometimes a creditor can petition the court to order that the trustee satisfy the creditor’s judgement of any payments that the beneficiary is entitled to, up to 25% of the payment that the beneficiary should get. As long as the amounts are not necessary for the support of the beneficiary
What is one of the few things that creditors can reach a spendthrift trust for?
Necessary’s that were supplied to the beneficiary or his family, and sometimes if the court finds it equitable and reasonable, they can order that the trustee satisfy all or part of a restitution judgement to the victims of a felony committed by the beneficiary
Can people create spendthrift trust for their own benefit in order to prevent creditors from reaching the refunds question
No not if it is to commit fraud on creditors. In California, this kind of trust is valid, but then the attempted restraint against transferees or creditors is invalid
California’s anti-lapse provisions apply to both wills and what else?
Trusts
In California, how are no contest clauses treated?
Their enforcement is prohibited if probable cause exists to challenge the validity of the trust or instrument
How does an implied trust arise?
Not in the normal way. They usually come from operation of law or they are used by courts as a remedy for injustice
What are the two types of implied trusts?
– resulting trusts
– constructive trusts
What are typical situations when a resulting trust would arise?
- the trust has no beneficiaries (they died, they can’t be located, they disclaim their interests)
– no provision was made for apportionment of the trust
– trust was designated for a specific purpose is invalid, insufficient, or excessive
– the trust purpose was never described or is unclear
– carrying out the material purposes of the trust has become impractical
What is the rationale behind a purchase money resulting trust?
The presumed intent that the person paying for the property should receive the beneficial use of it
What is an exception to a purchase money resulting trust?
If the person paying the money has navigation to support the person whose name the title is taken in, there’s a presumption that a gift was made. Although this presumption can be rude but it was clear and convincing evidence
Can parole evidence be admitted for a purchase money resulting trust in order to show proof about the intent of the nature of the transaction question
Yes
What is the sole purpose of a constructive trust?
To require the holder of the property to divest himself of the benefit and transfer it to the person that is entitled to that asset. This is just a passive, temporary trust with the trustee’s sole duty being to transfer the title and position to the rightful owner of the property
What are the common specific circumstances that give rise to a constructive trust question
That property was acquired as a result of fraud
– when the property was obtained in violation of a fiduciary relationship, such as an attorney and client, trustee and beneficiary, doctor and patient, employer and employee, accountant And client, or business partners
Dash the property was gotten by criminal means, such as by killing the owner
What is the very important caveat for a constructive trust to be created?
There had to have been some intention for wrongdoing at the time of the conveyance to the person.
What are the different ways that a trustee can get power?
- from the trust instrument
– by statute
– implied in law
– granted by the court upon petition
Generally a trustee’s actions regarding things that are within his discretion are not subject to attack unless what?
He has abused his discretion in undertaking the conduct
If a trustee’s exercise of discretion has to be reviewed by a court, what is the standard that it is reviewed under?
An objective standard where he must act reasonably under the circumstances. And if he has sole or absolute discretion under the trust, his actions are reviewed under a good faith standard
Once a trust terminated, how long does the trustee continue to have powers?
Until the affairs of the trust have been wound up
California has adopted the Uniform Prudent Investor Act, and what does it say about trustees regarding guidelines and how they have to manage trust assets?
The trustee must invest and manage trust assets as a PRUDENT INVESTOR would considering the purposes, terms, and distribution while exercising reasonable care and caution. He must observe this role in managing all trust investments. His decisions regarding investments are then viewed in the context of the full trust portfolio and the overall investment strategy. Consider these factors:
– general economic conditions
– the effect of inflation or deflation
– tax consequences
– the role that each investment plays in the overall portfolio
– the expected total return
– other resources of the beneficiaries
– the need for liquidity or regular income as well as the preservation of capital
– the asset’s special relationship to one or more beneficiary
California has adopted the uniform principal and income act which addresses how expenses and accretion should be approved between the income and principal beneficiaries of a trust. What are the basic provisions of this?
– The trustee should pay ordinary expenses out of income, and extraordinary expenses and those solely beneficial to the remainder interest out of principle
– if there are corporate securities in the trust: cash dividends are regarded as income and stock dividends are considered additions to the principal for the benefit of the remainder interest
Can trustees delegate the performance of their duties to others question
Not unless permission is given in the trust instrument or the duties are delegated or purely administrative. If he employs agents or attorney needs to perform certain services he still is responsible for supervision of those agents
If a trustee commits a breach of the trust, what are the three possible remedies for the trust?
– Resulting in loss or depreciation in value to the trust, with interest
– any profit made by the trustee with interest
– any profit that would have a crude to the trust if there wasn’t a break
– Punitive damages if the breach was intentional
– Constructive trust on anyone that was not a bona fide purchaser that got property from the trustee
What are things that an exculpatory clause cannot relieve the trustee of liability for?
Dash acts committed intentionally, with gross negligence, in bad faith, or with reckless indifference to the interest of the beneficiaries
– profits gotten from a breach
–
How are exculpatory clauses viewed with regard to trusts?
They are viewed with disfavour and narrowly construed
