Term
| If silent, is a trust presumed revocable or irrevocable? |
|
Definition
|
|
Term
| Will a trust fail if the trustee dies, refuses, resigns, etc.? |
|
Definition
| The court will appoint a new one |
|
|
Term
| The beneficiary holds________ title the trustee holds________ title |
|
Definition
|
|
Term
| What are the elements of a private express trust? |
|
Definition
1. Intent to create a trust (not precatory language)
2. Trust res-property
3. Valid trust purpose-not illegal
4. Ascertainable beneficiaries-Identifiable by name |
|
|
Term
| Can a trust be created for an unborn child...a class...a charity...without naming the ascertained beneficiaries? |
|
Definition
|
|
Term
| What is an inter vivos trust? |
|
Definition
| A trust created in the lifetime of the settlor which can be created by a declaration of trust. |
|
|
Term
| What is a pour-over trust? |
|
Definition
| A provision in a will that directs the distribution of property to trust upon the happening of an event. |
|
|
Term
| What is a testamentary trust? |
|
Definition
| A trust that is contained in writing in a will or in a document incorporated by reference in a will. |
|
|
Term
| What are the requirements to create a charitable trust? |
|
Definition
1. Valid charitable purpose
2. Intent to create a charitable trust
3. Does not need ascertainable beneficiaries |
|
|
Term
| What is the cy pres doctrine in relation to a charitable trust? |
|
Definition
In order to carry out the testator's intent, under the cy pres doctrine a court may modify or change the terms of the trust to seek out an alternative charitable purpose or beneficiary if the purpose becomes impossible, impracticable.
The court WILL NOT apply this doctrine if settlor's intent appears to contradict changing the trust and will terminate it. |
|
|
Term
| What is a resulting trust? |
|
Definition
| When a trust fails in some way or there is an incomplete disposition of property, the court will artificially create a resulting trust which will return the trust res back to the settlor or his estate. |
|
|
Term
| What is a purchase money resulting trust? |
|
Definition
| When title is taken in the name of one party but another party supplied the consideration. |
|
|
Term
| What is a creditor's limit to obtaining trust assets? |
|
Definition
| He can only alienate trust assets to the extent a beneficiary can. |
|
|
Term
| What types of creditors can get to a spendthrift trust? |
|
Definition
1. Children and spouses entitled to support
2. State and federal tax creditors
3. Suppliers of necessaries |
|
|
Term
| What types of creditors can get to a support trust? |
|
Definition
|
|
Term
| How can a trust be terminated? |
|
Definition
1. When the purpose of the trust has been accomplished
2. If the settlor has reserved the right to revoke and revokes it.
3. If the settlor is dead and the trustee and all beneficiaries agree
4. If the beneficiaries all agree, and the trustee is unsuccessful in arguing that the material purpose of the trust is unfulfilled.
5. Court modification/termination because the purpose has been achieved, the purpose is illegal, impracticable, or impossible. |
|
|
Term
| When can a trustee be removed? |
|
Definition
1. The trustee has become incapable of performing his duties
2. The trustee has materially breached one or more of his duties
3. A conflict has arisen
4. The trust is performing ppoorly as a result of the trustee's actions. |
|
|
Term
| Who is entitled to trust income? Principal? |
|
Definition
Income-Life beneficiaries
Principal-Remaindermen |
|
|
Term
| Is a stock distribution considered income or principal? |
|
Definition
|
|
Term
| How are expenses allocated to income and principal? |
|
Definition
All trustee and trust expenses are cut down the middle except:
Income: Insurance premiums
Principal: payments on the principal of trust debt, taxes. |
|
|
Term
| If not specified in the trust property, does a trustee generally have the power to sell, lease, or transfer trust property? |
|
Definition
|
|
Term
| What powers does the trustee have? |
|
Definition
1. To sell or contract for trust property
2. To revoke the trust
3. To withdraw money from the trust
4. To modify the trust
All must be done with the intent of the settlor in mind. |
|
|
Term
| How must a trustee exercise the fiduciary duty of good faith and loyalty? |
|
Definition
1. He may not self deal including: buying or selling trust assets, borrowing from the trust, using trust assets to secure a loan. Self dealing creates an irrebuttable presumption of breach of loyalty.
2.Conflicts of interest: Investment in a corporation that the trustee has an interest in might affect the trustee's best judgment, but the presumption of bad faith can be rebutted. |
|
|
Term
| How must a trustee exercise the duty of prudence? |
|
Definition
1. He must act as a prudent investor would which requires considering a number of factors including: general economic conditions, the role investment plays in relation to the trust portfolio,
To Act as a prudent investor, one must:
A. Diversify investments
B. Make property productive
2. The trustee must not co-mingle trust assets (this is a loyalty issue as well)
3. The trustee must be impartial to trust beneficiaries. |
|
|
Term
| How does a trustee exercise his duty to inform and account? |
|
Definition
1. Duty to disclose to the beneficiaries complete and accurate information about the nature and extent of trust property
2. Duty to account for actions taken on behalf of the trust. |
|
|
Term
| Who is responsible for lost profits, interest etc stemming from breach of trust? |
|
Definition
| The trustee and he is not allowed to offset losses from breach against gains from anoher breach unless the beneficiaries ratified his actions. |
|
|
Term
| When is a co-trustee liable and not liable for the breach of the other co-trustee? |
|
Definition
Liable: Consenting to the action, negligently failing to prevent breach, concealing breach, delegating non-delegable duties
Not liable: the other co-trustee acts in bad faith. |
|
|
Term
| When is a trustee liable for breach of an agent? |
|
Definition
| Consenting to the action, negligently failing to prevent breach, concealing breach, delegating non-delegable duties |
|
|
Term
| When is a trustee entitled to indemnification from the trust? |
|
Definition
| A trustee is personally liable for contracts and torts committed and entered into as trustee but if he was acting within the scope of his duties, he may be indemnified. |
|
|
Term
| When a trustee sells to a bonafide purchaser without notice that the trustee has no authority to enter the transaction, can the transaction be set aside? |
|
Definition
| No, but if the trustee knows and participates in the breach he may be personally liable as well. |
|
|
