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Trusts
NA
30
Law
Graduate
07/15/2013

Additional Law Flashcards

 


 

Cards

Term
If silent, is a trust presumed revocable or irrevocable?
Definition
Revocable
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
Equitable and legal.
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
Yes.
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
Suppliers of necessaries
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
Principal
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
Yes.
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.
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