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Trusts, Wills, and Estates > Trusts > Flashcards

Trusts Flashcards

1
Q

What is required to create a private express trust?

A
  1. Intent
  2. Property
  3. Legitimate purpose
  4. A beneficiary
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2
Q

Does precatory language create a trust?

A

No

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3
Q

Can an unborn child be a beneficiary?

A

Yes, if part of a definite class gift.

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4
Q

When can one establish a charitable trust?

A

When it has a charitable purpose

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5
Q

What is the cy pres doctrine?

A

It allows a court to modify a trust if it has a general (not specific!) charitable purpose

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6
Q

If a court cannot modify a charitable trust under the cy pres doctrine, where does the property go?

A

A resulting trust

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7
Q

What is a remedial trust?

A

An equitable remedy created by law, either a resulting or a constructive trust.

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8
Q

What is a resulting trust?

A

It is a trust that conveys property back to the settlor or his estate so to avoid unjust enrichment.

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9
Q

What is a constructive trust?

A

It is created when there is wrongful conduct directed toward the settlor that caused the creation of the trust.

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10
Q

What is a mandatory trust?

A

The trustee has no discretion to distribute

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11
Q

What is a discretionary trust?

A

The trustee has complete discretion to distribute

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12
Q

What is a support trust?

A

The trustee must distribute so to support the beneficiary

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13
Q

Can a beneficiary transfer her equitable interest?

A

Yes, unless the trust or statute limits this

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14
Q

When can a creditor reach trust principal or income?

A
  1. Spousal or child support
  2. Basic necessities
  3. Federal or state tax liens
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15
Q

What is a pour-over trust?

A

Testator’s creditors cannot reach the testator’s assets

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16
Q

What is a spendthrift clause?

A

The beneficiary cannot transfer her equitable interest

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17
Q

When can a creditor reach the beneficiary’s equitable interest?

A

When paid

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18
Q

What the is the unfulfilled material purpose doctrine?

A

A trustee can block premature termination of a trust if it is still serving some unfulfilled material purpose.

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19
Q

When can a trust be terminated?

A

Either by express terms, or if the settlor and all beneficiaries consent.

20
Q

If the settlor is alive, when can a trust be modified?

A

If he expressly reserved it, or if all beneficiaries agree and it does not interfere with a primary purpose of the trust

21
Q

If a settlor has died, when can a trust be modified?

A

If all beneficiaries agree, and an unforeseen event has frustrated the purpose of the trust

22
Q

Can a trustee unilaterally terminate or modify a trust?

A

No

23
Q

When can a trustee be removed?

A
  1. Incapacity (jail, ill, etc.)
  2. Breach of fiduciary duties
  3. Underperformance of the trust
24
Q

What is the common law rule on income and principal?

A

The beneficiary is entitled to income, and the holder of the remainder interest is entitled to the principal.

25
Q

What is the unproductive property rule?

A

If a property in a trust has produced little to no income, an income beneficiary was entitled to some portion of the proceeds

26
Q

Are distributions of stock principal or income?

A

Principal

27
Q

What is the modern approach to income and principal?

A

Under the Uniform Principal and Income Act (UPAIA), evaluate the total return of the trust portfolio without regard to classification.

A trustee may allocate as necessary, provided allocations are reasonable and in accord with the trust instrument.

28
Q

What is the future interest for a fee simple determinable?

A

Possibility of reverter

29
Q

What is the future interest for a fee simple subject to condition subsequent?

A

Right of entry

30
Q

What is the future interest for a life estate?

A

Reversion

31
Q

What is a remainder interest?

A

A future interest capable of becoming possessory at the natural termination of the prior estate

32
Q

What is a vested remainder?

A

The remainderman is ascertained and there is no condition precedent

33
Q

What is vested as a class gift?

A

There is a class who will take, and the gift has vested in at least one person

34
Q

What is a contingent remainder?

A

A taker is either unascertained or is subject to a condition precedent

35
Q

If the instrument is silent, what are the trustee’s powers?

A

Whatever is necessary to act as a reasonably prudent person

36
Q

Does the trustee have legal title?

A

Yes, he is effectively the owner

37
Q

What is the duty of loyalty for a trustee?

A

Must act in the best interests of the beneficiaries. Determined by both an objective and subjective test.

38
Q

What is the no further inquiry rule?

A

If a trustee has been found to be self-dealing, courts do not evaluate reasonableness or good faith unless the trust permits self-dealing

39
Q

If a trust instrument permits self-dealing, what is the inquiry?

A

Evaluate whether it is reasonable and fair for the trustee to avoid liability

40
Q

What is the trustee’s duty of care?

A

The care that a person of ordinary prudence would practice in the administration of his own estate.

41
Q

If a trustee has special skills, does that factor into the duty of care?

A

Yes, the trustee is held to a heightened standard

42
Q

Under the common law, could a trustee delegate authority?

A

No

43
Q

Under the modern approach, is delegation permitted?

A

Yes, if unreasonable for the settlor to expect the trustee to perform certain functions. The trustee must still oversee decision-making.

44
Q

Under the common law, what investments could a trustee make?

A

Only those enumerated in specific lists of acceptable investments.

45
Q

Under the modern approach, what investments can a trustee make?

A

The prudent investor rule governs, and diversification is expected.

46
Q

What is the duty of impartiality?

A

A trustee has a duty to balance the competing interests of present and future beneficiaries

47
Q

What administrative duties does a trustee have?

A

The duty to inform beneficiaries and the duty to account

Trusts, Wills, and Estates (4 decks)

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