Trust

Question 1

Trust

Answer 1

Trust is a fiduciary relationship where one party hold a title for the equitable benefit of another. Trust requires;
1. Trust res- property
2. Intent
3. Legal purpose
4. Ascertainable beneficiaries ( can not be dog)

Question 2

Lack of a trustee

Answer 2

A true will not fail for a lack of a trustee

Question 3

Secret trust

Answer 3

Occurs when the settlor leaves a bequest to a beneficiary but with a private understanding of what the trust is to be used for.

Question 4

Discretionary trust

Answer 4

A trust where a settlor reserves significant authority over the trust to the trustee which could include naming the beneficiaries/ amount and type of gifts.

Question 5

Constructive trust

Answer 5

Created by court for the purpose of preventing unjust enrichment forcing the wrong-doer to transfer any property within the constructive trust to the proper beneficiaries.

Question 6

Charitable trust

Answer 6

Trust created for a charitable purpose.
(Does NOT require a ascertainable beneficiary)

Question 7

Cy pres doctrine

Answer 7

Allows when the beneficiary of the charitable trust no longer exist. The trust can be reformed to given gift to the successor or other organization doing the same work.

Question 8

Duty to Administer

Answer 8

A trustee has a duty to follow the terms set in the trust. ( Except when they’re against public policy or illegal)

Question 9

Duty of loyalty

Answer 9

Trustee has a duty to act for the sole interest and benefit of the beneficiaries.

They can NOT:
1. Take secret profits
2. Self deal
3. Unsprising trust opportunities

Question 10

Duty to inform/ account

Answer 10

Trustee has a duty to keep the beneficiaries reasonable informed as to the trust administration and assets.

Duty to account to the beneficiaries(Min- annual)

Question 11

Prudent investor rule( duty of diversify)

Answer 11

The trustee is to act as a reasonable prudent investor would under the circumstances. Trusteee are required to exercise reasonable care in exercise of financial trust assets.

Required to diversify investment to avoid loss under single investment

Question 12

Duty to separate trust assets

Answer 12

Trustee has an obligation to keep trust assets segregated from other assets

Question 13

Duty of impartiality

Answer 13

Trustee is obligated to treat all beneficiaries equally given the circumstances

Question 14

Duty of care

Answer 14

Trustee has a duty to act as a reasonably prudent person under the similar
Circumstances

Question 15

Duty to preserve trust property

Answer 15

Trustee is required to take steps to assure that trust property is properly cared for and maintained. In case of financial assets the duty is to avoid loss.

Question 16

Duty to make property productive

Answer 16

Trustee is required to make sure that trust property which can be made productive and produce income for a trust is made productive.

( can NOT allow someone to live rent free)

Question 17

Duty to not delegate

Answer 17

Trustee may not delegate functions that are within the trustees skills
( does NOT apply to financial asset/ management may be delegated)

Question 18

Duty to Co- trustees

Answer 18

Co- trustees have a duty to act with each other in performance of trust duties and to manage the other trustee to avoid a breach or duties by another.

Question 19

Duty to defend

Answer 19

Trustee has the obligation to defend against all claims of the trust

Question 20

Revocable trust

Answer 20

A trust may be terminated by trustor /settlor. A trust can be revoked by
1. The manner indicated in the trust
2. By writing other then a will unless the trust makes the manner indicated in the trust exclusive
3. By any settlor as to their portion
4. Person granted power of revocation

Question 21

Irrevocable trust

Answer 21

Trust becomes irrevocable at the death of the last settlor.

Question 22

Termination of a irrevocable trust

Answer 22

If all beneficiaries agree they can petition the court for the termination of the trust as long as it does not disrupt the testator intent.

Question 23

Modification or trust

Answer 23

A revocable trust maybe be modified/ amended by the settlor at any time while they are alive.

(In manner indicated or in a manner originally created)

Question 24

Remedies against a trustee

Answer 24

Removed as a trustee
Personally liable for damages
Make trust whole

Question 25

Rights of creditors

Answer 25

Generally a judgment creditor cannot attack assets in a trust against the beneficiary until such time as those funds become available

Question 26

Termination of trust

Answer 26

Can be terminated when any of the following occurs
1. Terms of the trust expires
2. The trust purpose is fulfilled
3. The trust becomes unlawful ( law changes )
4. The purpose becomes impossible to fulfill.
5. The trust is revoked.