Trusts & Estates

Question 1

Trust

Answer 1

A fiduciary relationship with respect to property with which one person holds legal title (trustee) to the trust property (res) subject to enforceable equitable rights in another (beneficiary)

Question 2

Requirements of an Express Private Trust

Answer 2

1. Settlor with capacity and present intent to create a trust
2. Competent trustee
3. Trust property (res)
4. Beneficiaries
5. Valid trust purpose
6. Formalities (inter vivos trust vs. testamentary trust)

Question 3

Does the failure to name a trustee defeat a trust?

Answer 3

No, Court will appoint.

Question 4

Beneficiary

Answer 4

Must be capable of taking and holding title to property. Must also be definite and ascertainable so as not to violate the Rule Against Perpetuities

Question 5

Valid trust purpose

Answer 5

Invalid if illegal; impossible to achieve; contrary to public policy; intended to defraud creditors

Question 6

Formalities of an Inter Vivos Trust

Answer 6

Declaration of trust by property owner that he holds in trust, or transfer of property by settlor to trustee

Question 7

Formalities of a Testamentary Trust

Answer 7

Essential terms ascertained by the will/incorporated document/facts of independent significance/exercise of power of appointment

Question 8

Spendthrift trust

Answer 8

Beneficiary may not voluntarily or involuntarily transfer his interest (nor can creditors reach it)

Invalid if settlor is also a beneficiary

Unenforceable against claim brought by government or by child, spouse, or former spouse with support order

Question 9

Transfer of Beneficiary’s Interest

Answer 9

Beneficiary may voluntarily transfer their interest in trust & creditor’s may levy on his interest

Question 10

Discretionary trust

Answer 10

Before payment, interest can’t be reached by creditors. Must pay creditors directly if trustee has notice.

Question 11

Modification of a trust by the settlor

Answer 11

UTC—> trusts are presumed revocable & amendable unless terms expressly state otherwise

Traditional—> must reserve rights to revoke or modify

Question 12

Modification of a trust by beneficiary

Answer 12

Settlor and all beneficiaries consent, even if modification conflicts with a material purpose; or all beneficiaries consent and no material purpose will be frustrated.

Unborn beneficiaries need appointed representative.

Question 13

Modification of a trust by a trustee

Answer 13

If trust property is less than $50k and is inefficient to justify administrative costs, trustee can move to modify

Question 14

Modification of a trust by a court

Answer 14

Courts may modify if the trust could have been modified if all beneficiary’s consented and interests of the non-consenting beneficiaries will be protected

May modify if continuation is wasteful or impracticable

May reform to reflect settlor’s intent if clear and convincing evidence

Question 15

Charitable trust

Answer 15

Benefits the whole public and has indefinite beneficiaries. May be perpetual, unless a shifting interest from private to charitable. Enforceable by settlor, a qualified beneficiary, or an attorney general.

Question 16

Cy pres

Answer 16

If settlor’s intended purpose is impracticable, unlawful, or wasteful, Court substitutes new charitable purpose

Must find the settlor had charitable intent and must select another purpose as near as possible to original

Question 17

Honorary trust

Answer 17

Not for charitable purpose but no private beneficiary who can enforce (i.e., animal trust)

Enforceable by someone named in trust or appointed by the court

Question 18

Pour over will to revocable trust

Answer 18

Trust may be established before, after, or concurrently with the will

Freely amenable and revocable

Valid even if trust unfounded during settlor’s lifetime

Question 19

Resulting trust

Answer 19

Purchase money resulting trust—> person taking title did not supply consideration, but their sole duty is to convey title to the one furnishing consideration

Failure of express trust—> resulting trust arises with settlor as beneficiary

Question 20

Constructive trust

Answer 20

Equitable remedy to prevent unjust enrichment