Key Issues - Trusts Flashcards Preview

FL Trusts Bar Exam 2020 > Key Issues - Trusts > Flashcards

Flashcards in Key Issues - Trusts Deck (37)
Loading flashcards...

What is the essence of a trust

It is a fiduciary relationship between a trustee who holds legal title and beneficiaries who hold equitable title to property


Who are the four types of people that can be involved in a trust and what do they do

Settlor - the person who creates a trust
Testator/Testatrix - the person who creates will
Beneficiary - anyone who gets a portion of the stuff under the trust terms
Trustee - the person who holds & manages the Settlor's property for the beneficiaries


What are the six trust elements

1) Settlor w/ capacity (to convey)
2) Present intent to create a trust
3) Trust res/property
4) 1 or more definite beneficiaries
5) trustee with duties
6) valid purpose
Note that a trust will not fail for want of a trustee. If a trustee is not named, or is removed, the court will appoint a trustee


Can a sole trustee be a sole beneficiary?



If real property is among the trust res, what is required

the Statute of Frauds requires a writing signed by 2 witnesses


If a trust has testamentary provisions, what is required

the Statute of Wills requires Will formalities:
Trust must be in writing, signed by settlor at end, attested (signed) by 2 witnesses who sign in settlor's presence and in the presence of each other.
Testamentary capacity - Settlor knows nature & extent of her property, people who are natural objects of her bounty


What is the Rule Against Perpetuities in a trust?

360 years (discuss when you see a class gift in a trust)


What are the elements of a charitable trust

Intent to create the trust
Trust res/property
Indefinite beneficiaries
Charitable purpose - benefit public - good things; religion, science, gov't, education
Enforced by settlor while alive, state attorney general or charity after settlor's death


What is the cy pres rule

"as near as possible" find another charity with same/similar purpose


how does the rule against perpetuities apply to charitable trusts

RAP doesnt apply - can be perpetual


What is the major way to challenge testimentary capacity and what is the presumption involved

Undue influence - overcome testator's free will.
Presumption of undue influence arises if beneficiary was a substantial beneficiary, had a confidential relationship with testator/settlor, and was active in procuring the will.
Fraud, Duress, Mistake


What are the 4 duties owed by trustees (and thus are grounds to remove a trustee for breach of trust)

Duty of loyalty - no self dealing
prudent investor rule
impartiality to all beneficiaries
account and inform beneficiaries of the trust assets


What is the trustee duty of loyalty

No self dealing: trustee may not borrow trust funds, comingle


What is the prudent investor rule

Trustee must exercise due care, invest res as a reasonable investor. Trustee must diversify. Trustee must make due care in selecting, monitoring agents. Trustee must keep trust productive - as a whole, total return. Trustee must preserve assets - insure.


What is the trustee duty of impartiality to all beneficiaries

income v remainder beneficiaries


What is the trustee duty to account and inform beneficiaries of the trust assets

Annually, keep beneficiaries reasonably informed


What do beneficiaries have standing to do?

enforce non-charitable trusts (force trustee to follow the trusts' terms)


Are beneficiaries able to transfer their equitable interest? how about assignments?

Equitable interests are transferable. Assignments generally valid, unless prohibited by spendthrift provision


What is the difference between income beneficiaries and remainder beneficiaries

income beneficiaries get trust income; remainder beneficiaries get trust res distribution at the end


What are the three important things to remember about the revocable inter vivos trust

1) it is the default in FL unless the trust says otherwise
2) settlor can amend trust provisions until loss of capacity or death
3) declaration of trust is okay, no need to deliver trust res/property to self


What are the four important things to remember about an irrevocable trust

1) A present transfer of entire interest away from Settlor
2) Revocable inter vivos trust becomes irrevocable at settlor's death
3) If Settlor survives 1 year after delivery to irrevocable trust, the trust res doesn't become part of elective estate for spousal elective share
4) Protects Settlor from creditors, unless purpose is to defraud creditors


What are the two important things to remember about a testamentary trust

1) Trust created in a will upon death of Testator
2) Sometimes used to describe a trust which requires disposition of property after the settlor's death


What are the two important things to remember about a discretionary trust

1) Trustee has sole discretion to make payments under the trust terms
2) Beneficiary can't force Trustee to make payments unless trustee acts in bad faith, or abuses discretion


What are the two important things to remember about a support trust

1) distribution to beneficiaries is up to trustee
2) discretion is tied to level necessary for health, education, maintenance of beneficiary's accustomed standard of living


What is the one important thing to remember about a mandatory trust

distribution to beneficiaries is required. Ex: trust income to A for life, remainder to B. A's interest is mandatory and A can compel Trustee to pay.


What is a spendthrift provision in a trust

Trust which disallows assignment by beneficiary & creditor levy. Provision prohibits voluntary & involuntary transfer of beneficial interest


What is a voluntary vs involuntary transfer of beneficial interest as it relates to the spendthrift provision prohibition

Voluntary - beneficiary assigns her interest to someone else (right to be paid usually)
Involuntary - creditor of beneficiary attaches beneficiary's interest
Note however that creditors cannot attach beneficial interest until disbursement of payment


What are the three important things to remember about a secret trust

1) outright devise to someone with instructions to hold for benefit
2) orally created trust before settlor death
3) it is enforceable in FL - constructive trust to avoid unjust enrichment


What are the two important things to remember about a constructive trust

1) equitable remedy to prevent unjust enrichment
2) someone got the property through wrongdoing - breach of trust, fraud, mistake, undue influence, duress


What are the two important things to remember about a resulting trust

1) implied reversion to settlor/settlor's heirs if express trust fails for some reason (ex: beneficiary predeceased)
2) no wrongdoing