Trusts

Question 1

In a trust, normally the trustee has (i) _________ title and the beneficiaries have (ii) ________ title.

Answer 1

(i) legal; (ii) equitable

Question 2

To create a trust, a settlor must have (i) _____ for the trust to take effect immediately, there must be (ii) ________ intent to transfer specific property that the Settlor has rights to. An inter vivos trust must have a named (iii) ___________ (though a testamentary trust can have one appointed by the court). The trustee must have (iv) _______. Beneficiaries must be (v) _______. And the trust must have a valid (vi) _______. A trust cannot have a single person as both trustee and beneficiary.

Answer 2

(i) intent; (ii) express; (iiii) trustee; (iv) obligation; (v) ascertainable; (vi) purpose

Question 3

An inter vivos trust must include a (i) ________ of trust by the property owner that he holds in trust or (ii) a ______ of property by the settlor to the trustee.

Answer 3

(i) declaration; (ii) transfer

Question 4

A testamentary trust must be ascertainable from the (i) ______.

Answer 4

(i) will

Question 5

A (i) _____ trust is intended to benefit the public. It must have (ii) ______ beneficiaries, and the (iii) _____ does not apply. This trust can be enforced by the settlor, a qualified beneficiary, or the (iv) _____ ______. Courts use the doctrine of (v) __ _____ to update a trust if the intended purpose becomes impracticable, unlawful, or wasteful.

Answer 5

(i) charitable; (ii) indefinite; (iii) RAP; (iv) attorney general; (v) cy pres

Question 6

An (i) _____ trust is not a charitable trust, but it’s not for identifiable persons. It’s enforced either by someone named in the trust or the court, and if the property is (ii) _________, it will be distributed to the settlers or his successors.

Answer 6

(i) honorary; (ii) excessive

Question 7

A beneficiary may voluntarily transfer his (i) ______ in a trust, and his creditors may (ii) ______ on his interest.

Answer 7

(i) interest; (ii) levy

Question 8

A (i) _____ trust provides that the beneficiary may not voluntarily or involuntarily transfer his interest (creditors cannot reach). A spendthrift trust is not valid if the (ii) _______ is also a beneficiary. But the government, child, or spouse can bring a court order against the trust.

Answer 8

(i) spendthrift; (ii) settlor

Question 9

In a (i) __________ trust, the creditors cannot reach the trust until the trustee elects to make a distribution.

Answer 9

(i) discretionary

Question 10

Generally, a (i) __________ may revoke or modify a trust.

Answer 10

(i) settlor

Question 11

If all (i) _______ consent, a trust can be terminated (must have Settlor if still alive), but termination cannot frustrate any (ii) ______ purpose of the trust, and all current and potential beneficiaries must be represented. In most states, a spendthrift trust cannot be terminated without the (iii) ______’s consent.

Answer 11

(i) beneficiaries; (ii) material; (iii) settlor’s

Question 12

Generally, a court may (i) ______ a trust, to make it respond to unanticipated circumstances, to fix impracticability or waste. Will try to abide (ii) _______’s will.

Answer 12

(i) modify; (ii) settlor’s

Question 13

A trustee owns the duty of (i) _______ (no self-dealing, no loans, unless waived by Settlor), the duty to (ii) _______ (regular updates), the duty to keep trust property (iii) __________, the duty to (iv) ______ claims, and the duty to (v) ________ property value, and use it productively.

Answer 13

(i) loyalty; (ii) report; (iii) separate; (iv) prosecute and defend; (v) preserve

Question 14

If there is a breach, the trustee is liable for the greater of: (i) the amount to _______ the trust, or (ii) the ______ of the breach.

Answer 14

(i) restore; (ii) profit

Question 15

The five elements of an express trust are: (i) a ______ with the capacity to coney, (ii) a _______ intent to create a trust, (iii) a competent __________ with obligations, (iv) a ________ beneficiary, and (v) the same person cannot be the sole trustee and sole beneficiary. In addition, there must be a (vi) _______ disposition in trust of specific property then owned by the settlor, and the trust must have a valid purpose.

Answer 15

(i) settlor; (ii) present; (iii) trustee; (iv) definite; (vi) present

Question 16

To create a trust, the intent must be present, not (i) ______, although a future interest can be trust property.

Answer 16

(i) future

Question 17

Language of hope (precatory expressions), like “I wish to . . .” does not create a (i)______

Answer 17

trust

Question 18

Grounds for the court to remove a trustee include (i) a serious ______ of the trust, (ii) lack of ______ among co-trustee; (iii) ________ for administration; (iv) _______ change in ________.

Answer 18

(i) breach; (ii) cooperation; (iii) unfitness; (iv) material change in circumstances

Question 19

If a trust fails for lack of beneficiary, a (i) ______ trust in favor of the settlor or his successors is presumed

Answer 19

(i) resulting

Question 20

A secret-trust is where a will makes a gift to the beneficiary, but the beneficiary knows there’s another intended purpose. If he can present (i) ______ evidence of the promise, and it can be proven by (ii) _______ and ______ evidence, the court may create a (iii) _______ trust.

Answer 20

(i) extrinsic; (ii) clear and convincing; (iii) constructive

Question 21

A (i) ______ trust directs the trustee to pay only as much of the income (or principal) as is necessary for the care of the beneficiary. It cannot be attacked by creditors.

Answer 21

(i) support

Question 22

A (i) ______ trust directs the trustee to pay only as much of the income (or principal) as is necessary for the care of the beneficiary. It cannot be attacked by creditors.

Answer 22

(i) support

Question 23

In evaluating the prudence of investment (standard of care), the court will rely on the uniform prudent investor act, which looks at reasonable care, loyalty, and also the use of (i) ______ strategy, allows all types of (ii) _______, and looks at the general economic consequences including tax, risk and expected return, other resources, need of regular income, etc. Just like a pension committee.

Answer 23

(i) portfolio; (ii) investments

Question 24

In general, a (i) ______ can direct a trustee to invest or act in a way that may challenge fiduciary standards, but that’s ok if it’s a direct obligation from the settlor.

Answer 24

(i) settlor

Question 25

Some trust expenses are charged to income. They include: (i) ____ of the trustee compensation (and other administrative expenses), all (ii) ______ expenses, and (iii) ______ expenses. In contrast, some expenses are charged to principle. They include (iv) ______ of trustee and administrative costs, payment on the (v) _____ of a trust debt, (vi) ______ taxes, and (vii) _______ related to environmental matters.

Answer 25

(i) 50%; (ii) ordinary; (iii) insurance; (iv) 50%; (v) principal; (vi) estate; (viii) disbursements

Question 26

If a Grantor-spouse retains the power to revoke a trust, those assets are subject to the (i) _______ share of the spouse.

Answer 26

(i) elective

Question 27

In a (i) _____ trust bank account, the deposit declares himself trustee on behalf of the named (ii) _________. It can be revoked by (iii) ____ funds, any (iv) ______ _____ to revoke, and unlike joint accounts, any (v) _________ will provision.

Answer 27

(i) Totten; (ii) beneficiary; (iii) withdrawal; (iv) expire intent; (v) contradictory

Question 28

A gift causa mortis must be accomplished by (i) ______ delivery or constructive delivery (like a key).

Answer 28

(i) actual

Question 29

A Purchase Money Resulting Trust is when the beneficiary buys property and titles it in the name of a non-close-family person. The beneficiary must prove by (i) _____ and ______ evidence that he supplied consideration.

Answer 29

clear and convincing