Trust Lean Sheet

Question 1

What if an express trust fails?

Answer 1

if an express trust fails, courts may imply constructive or resulting trust.

Question 2

Pet Trust

Answer 2

A Pet trust is statutory purpose trust. This instrument appoints an individual to enforce.

It terminates at the death of the last identified pet alive at trust creation.

Question 3

Totten Trust

Answer 3

Totten trust, also known as a “payable-on-death” (POD) account, is a financial arrangement where an individual (the depositor) opens a bank account and designates a beneficiary to receive the account’s funds upon the depositor’s death. This setup allows for the direct transfer of assets to the beneficiary, bypassing the probate process.

This is not a joint bank account. Depositor controls & may revoke during life.

Example: A settlor may create a savings account trust by depositing money in a bank in the name of “A, in trust for B.

Question 4

Life Insurance Trust

Answer 4

Life insurance trust is permissible even though not funded at creation.

Question 5

Secret Trust

Answer 5

A secret trust is a provision in a will that looks like a gift but clear & convincing evidence shows an unwritten promise to care for an unnamed Beneficiary. This creates a constructive trust.

Question 6

Semi-Secret Trust

Answer 6

A semi-secret trust is a provision in a will that directs property held in trust but no beneficiary or charity included. this creates a resulting trust.

Question 7

Charitable Trust

Answer 7

A charitable trust requires valid charitable purpose that benefits charitable cause or broad section of the community.

Question 8

How is the Charitable Trust created?

Answer 8

A charitable trust may be created by any of the methods for creation of an express trust, and there must be a settlor with capacity to convey, properly expressed intent, and a specific trust res.

Question 9

Cy Pres Doctrine

Answer 9

if charity no longer exists or purpose impossible, ct will
use equity to fulfill T’s intent as close as possible (no lapse).

Question 10

How can a charitable trust be enforced?

Answer 10

It can be enforced by settlor, state atty gen, co-Trustee, or individual w/ special interest in enforcement

Question 11

Honorary Trust

Answer 11

An honorary trust has no ascertainable Beneficiary & no broad charitable purpose, but private goal of settlor.

Since there is no direct beneficiary, the trustee is expected to honor the trust’s terms, but if they choose not to, there may be no legal recourse to compel performance.

Otherwise, it creates resulting trust.

Question 12

Constructive Trust

Answer 12

A constructive trust is an equitable device to prevent unjust enrichment from wrongdoing(fraud, duress, undue influence, violation of fiduciary duty).

Person with legal title is required to pass title to implied beneficiary.

Question 13

Resulting Trust

Answer 13

A resulting trust is an equitable devise that creates a reversionary interest (e.g., private trust fails, charitable trust cant be repurposed by cy pres).

Trustee is required to transfer property to settlor or his estate.

Question 14

Purchase-Money Resulting Trust

Answer 14

A purchase-money purchasing trust is when one party buys property but title is in name of another. It is a rebuttable presumption of resulting trust, but rebuttable presumption of gift if a family relationship.

Question 15

DISTRIBUTION RIGHTS OF BENEFICIARIES & CREDITORS;

What is a Support Trust?

Answer 15

A support trust is one containing a provision that only so much of the income as is necessary for the beneficiary’s support may be paid out.

Trustee must distribute income and principal as needed (health, education, maintenance, & support);

Question 16

Can a beneficiary demand distributions under a support trust?

Answer 16

The beneficiary cannot demand distributions beyond what is needed for their support as defined by the trust.

Question 17

Can beneficiary’s creditors get trust assets from support trust?

Answer 17

No. creditors cannot force payments beyond the intended support.

However, once a payment is made to the beneficiary, creditors can attempt to claim those funds.

Question 18

DISTRIBUTION RIGHTS OF BENEFICIARIES & CREDITORS;

What is a Discretionary Trust?

Answer 18

Gives the trustee full discretion over when and how much to distribute.

Question 19

Can a beneficiary compel any distributions from a Discretionary Trust?

Answer 19

No. Beneficiary can’t compel any distributions unless Trustee breaches fiduciary duty.

Question 20

Can beneficiary’s creditors get trust assets from a discretionary Trust?

Answer 20

Beneficary’s creditors can’t get trust assets if Trustee doesn’t distribute.

Question 21

DISTRIBUTION RIGHTS OF BENEFICIARIES & CREDITORS;

What is a Mandatory Trust?

Answer 21

a mandatory trust is a type of trust that requires the trustee to distribute income or principal to the beneficiary according to specific terms set forth in the trust document.

Question 22

Mandatory Trust;

Limited Trustee Discretion

Answer 22

The trustee must follow the distribution instructions and cannot withhold payments even if they believe it would be in the beneficiary’s best interest.

Question 23

Can a beneficiary compel any distributions from a Mandatory trust?

Answer 23

Yes. Beneficiary can compel distributions.

Question 24

Can beneficiary’s creditors get trust assets from a Madantory Trust?

Answer 24

Since distributions are required, a beneficiary’s creditors may have a right to claim the funds once they are due to be distributed.

Question 25

DISTRIBUTION RIGHTS OF BENEFICIARIES & CREDITORS; Spendthrift Trust

Answer 25

Spendthrift Trust expressly restricts Beneficiary’s power to voluntarily & involuntarily transfer his equitable interest. It prevents the Beneficiary’s creditors from getting trust assets (except child/spousal support, necessities providers, tax liens, tort judgments, & restitution due to the Beneficiary’s criminal conviction); applies only while property is undistributed.

Question 26

Spendthrift Thrust-Trustee’s Control Over Distributions

Answer 26

The trustee manages when and how distributions are made, ensuring that the beneficiary does not recklessly spend the funds.

Question 27

DISTRIBUTION RIGHTS OF BENEFICIARIES & CREDITORS; Settlor's Creditors for irrevocable trust

Answer 27

irrevocable – Creditor can only get amount settlor could have gotten (if settlor is a Beneficiary);

Question 28

DISTRIBUTION RIGHTS OF BENEFICIARIES & CREDITORS; Settlor's Creditors for revocable trust

Answer 28

revocable – if settlor is alive, Creditor can get all trust assets, if settlor is dead, Creditor can get trust assets only if probate estate is insufficent.

Question 29

DISTRIBUTION RIGHTS OF BENEFICIARIES & CREDITORS; Beneficiary's Creditors

Answer 29

Beneficiary's Creditors can get distributed property directly from Beneficiary; undistributed trust assets are subject to restrictions by type of trust.

Question 30

TRUST ADMINISTRATION Trustee's Powers

Answer 30

Trustee has all powers specified by trust instrument or implied by trust purpose; limitations by trust terms. The trustee must administer the trust in good faith, in accordance with its provisions and purposes.

Question 31

TRUST ADMINISTRATION Co-Trustee's Powers

Answer 31

Co-Trustee's must act unanimously unless trust terms express contrary intent.

Question 32

TRUST ADMINISTRATION Asset Allocation for Life Beneficiaries

Answer 32

Life Beneficiary entitled to trust income,remainder Beneficiary's are entitled to principal upon trust termination;

Question 33

TRUST ADMINISTRATION Trustee duty to allocate assets

Answer 33

Trustee must allocate assets as income or principal in fair & balanced way to fulfill trust purpose. ½ of Trustee's compensation & accounting expenses is charged to income, other ½ is charged to principal.

Question 34

FIDUCIARY DUTIES Duty of Loyalty

Answer 34

The trustee is a fiduciary who owes a duty of loyalty and utmost good faith in the administration of the trust for Beneficiary's benefit.

Question 35

FIDUCIARY DUTIES Duty to avoid conflicts(self-dealing)

Answer 35

The trustee must avoid conflicts between the trustee's own interests and those of the trust and must not enter into transactions with the trust in an individual capacity unless the trust instruments authorizes such action, the court grants permission, or all the beneficiaries, who must be of age, competent, and fully informed, consent to the transaction.

Question 36

If the trustee purchases, in an individual capacity, property that should have been purchased for the trust, the beneficiaries can compel the trustee to hold such property subject to

Answer 36

a constructive trust.

Question 37

FIDUCIARY DUTIES Duty to Act Impartially

Answer 37

The trustee’s duty of loyalty extends equally to all beneficiaries of the trust, regardless of whether they have present interests in the income or future interests in the income or principal; the trustee may not favor either over the other.

Question 38

FIDUCIARY DUTIES DUTY OF PRUDENCE

Answer 38

Trustee may delegate if unreasonable for Trustee to perform (ministerial functions); must oversee delegates; must use reasonable care & judgment in investment decisions (diversification req’d); must be impartial in balancing the interests of all Beneficiaries.

Question 39

FIDUCIARY DUTIES Duty to Collect, Preserve, and Segregate Trust Property

Answer 39

The trustee has a primary duty to hold and preserve trust property against loss or waste. A trustee cannot commingle trust & personal assets.

Question 40

FIDUCIARY DUTIES Duty to Manage Trust Property with Care

Answer 40

The trustee has the duty to make the property productive and to use reasonable care and skill in choosing and managing investments.

Question 41

Duties toward Beneficiaries DUTY TO INFORM & ACCOUNT:

Answer 41

Trustee generally has a duty to keep the beneficiaries of the trust reasonably informed of the trust and its administration. Trustee must disclose complete & accurate info of trust at Beneficiary's request.

Question 42

Duties toward Beneficiaries Duty to Account

Answer 42

A trustee must provide an account at least annually, upon trust termination, and when a trustee changes, to each qualified beneficiary entitled to or potentially receiving income, and to anyone with revocation rights.

Question 43

Duties toward Beneficiaries Duty to Inform-Irrevocable Trust

Answer 43

Within 60 days after the date of creation of an irrevocable trust or of the date on which a revocable trust becomes irrevocable, the trustee must notify the qualified beneficiaries of the existence of the trust and the name and mailing address of the trustee.

Question 44

Duties toward Beneficiaries Duty to Distribute Income

Answer 44

The trustee shall distribute all net income derived from the trust at least annually. A trustee shall not be under any duty to investigate the resources of any beneficiary when determining whether to distribute trust property to such beneficiary.

Question 45

Trustee's Liability Trustee's Misconduct

Answer 45

Personally liable for losses due to breach of duty. Beneficiary may seek court removal of trustee for good cause.

Question 46

Trustee's Liability Co-Trustee's Misconduct

Answer 46

Personally liable for losses due to Co-Trustee's breach of duty if trustee participated, improperly delegated, approved, concealed, negligently enabled, or failed to take reasonable steps to compel redress.

Question 47

Trustee's Liability; Predecessor Trustee's Misconduct

Answer 47

Successor Trustee is personally liable for lossess due to predecessor breach of duty if trustee knew or should have known and allowed breach to continue or failed to take reasonable steps to redress.

Question 48

Trustee's Liability Exculpatory Clause

Answer 48

Trustee not personally liable without willful neglect. It still liable for breach of duty in bad faith or with reckless indifference.