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57 Cards in this Set

  • Front
  • Back
What is a will substitute?
A transaction that lets transferor obtain benefits of testamentary transfers (revocability, usability, modifibiality) without the burdens (time, money, red tape, publicity).
What must one transfer in order to create a valid will substitute?
Must transfer some "present interest" in property during the transferor's lifetime.
What are some examples of will substitutes?
(1) revocable trust

(2) life insurance

(3) joint bank account

(4) joint tenancy (with right of survivorship)
What is the definition of a trust?
A property arrangement in which legal and equitable title in property is severed.
What are the legally recognized valid purposes for a trust?
Anything so long as not illegal, tortious, or against public policy.
What are the requirements for the creation of a valid trust?
(1) trust intent
(2) trust res (property)
(3) identifiable beneficiary
(4) trustee
(5) a writing
What is the difference between an Inter vivos trust and a testamentary trust?
inter vivos - created during the settlor's life

testamentary trust - created in the settlor's will
What is a "pour over" trust?
A trust where the property in the trustor's will funnels into an existing trust at settlor/testator's death.
What is the difference between a self-settled trust and a third party trust?
self-settled: settlro is also the trustee and often retains a life estate in the proeprty as well.

third-party trust - settlor is not the trustee, but rather a third party is.
What is the difference between a private trust and a charitable trust?
private trust - has private beneficiaries

charitable trust - created for some charitable purpose
What is the difference between an express trust and an implied trust?
express trust - settlor voluntarily created the trust and followed the proper formalities

implied trust - this is an equitable remedy (constructive or resulting trust)
What is the requisite level of intent for creating a valid trust?
Settlor must show clear and definite present intent to sever legal and equitable title, intending to bind someone to mandatory duties over property to benefit another.
What are precatory words?

Is using these enough to establish the requisite intent to created a valid trust.
Precatory words - words expressing a mere hope, wish or desire.

Use of precatory words alone is not enough to establish the requisite intent to create a valid trust.
What is the name of the document that will control the trust's administration?
Either the "trust instrument" or the "trust document."
What is the "trust res?"
Any legally recognized, identifiable, and segregated property interest (i.e. anything that can be owned today, can be the subject matter of a trust).
Can a debt owed by the settlor constitute a trust res?

A debt owed to the settlor?
A debt owed by a settlor cannot constitute a trust res.

A debt owed to the settlor can comprise the res of a trust.
Can expected future earnings or profits that the settlro will receive constitute the res of a trust?
No.
Can an expectancy that the settlor has either through testate or intestate succession comprise the res of a trust?
No.
What is an unfunded life insurance trust?
This is a trust where the trust holds no assets, but the settlor has named the trustee as the beneficiary under a life insurance policy.
What does the Uniform Testimantary Additions to Trust Act (TUATA) allow the settlor of a trust to do?
GA allows the creation of an unfunded trust, funded solely via a futur epour over, IF the trust document existed at or before the execution of the will.

The trust can be amended post-execution of the will without incorporation by reference or acts of independent significance.
When is delivery of the trust res by the settlor to the trustee not required?
Then the trust is:

(1) self-settled

(2) testamentary
When constitutes "identifiable beneficiaries" for the purposes of creating a valid trust?
At least 1 member of the beneficiary group must be identifiable/ascertainable, i.e. able to enforce the trust, when distribution to them is to be made.
What is an honorary trust?
Where the settlor attempts to create a trust for a specific noncharitable purpose. No trust arises because tere is no beneficiary to enforce the direction of the trustee.

Trustee doe shave the power to carry out the directions for implementing the noncharitable purpose, provided the settlor has not directed the application of the funds for a period that violates the Rule Against Perpetuities.
What are some examples of honorary trusts?
Money set aside for the purpsoe of caring for a grave or caring for a pet.
What is a charitable trust?
A trust created for a charitable purpose.

Note: identifiable beneficiaries not allowed for a charitable trust unless the beneficiary is a specified charitable agency.
What are some of the recognized charitable purposes for a valid charitable trust?
(1) poverty relief

(2) education

(3) the advancement of ethics and religion

(4) public health

(5) prevention of animal cruelty

(6) repair of tombstones and cemeteries

(7) governmental purposes
What happens if a trustee is not named in a trust document, or the sole trustee resigns, dies, or is discharged?
NO trust fails for lack of a trustee, UNLESS the trust involves purely personal powers which only the trustee can perform.

Thus, if no trustee is named (or the sole trustee declines, is discharged, or dies), the court will appoint one.
What are the reasons that a court will allow a trustee to resign?
(1) trustee is unable to continue

(2) trust has become far more burdensome

(3) disagreement with a beneficiary that is bad for the trust

(4) resignation will substantially benefit the trust

(5) resignation will not substantially disadvantage the trust

(6) There is another co-trustee, so resignation is not harmful.
How are trustee vacancies filled?
Trustee vacancies are filled by the provisions of the trust instrument or by the court as consistent with the settlor's intent.
Who can serve as a trustee?

Can there be more than one trustee at one time?
Trustees can be individuals or institutional.

Trustees can be simultaneous (multiple trustees at once) or successive.
How are decisions made if a trust has multiple trustees?
Decisions mus tbe made by a unanimous determination unless the trust document permits otherwise, OR an emergency demands less than full consent.
What happens if the sole trustee is also the sole beneficiary?
Merger occurs and the trust is never created, or if created, the trust terminates, leaving a fee simple absolute in the trustee/beneficiary.
Who enforces a private trust?

Who enforces a charitable trust?
Private trusts are enforced by those who are ascertainable, identifiable beneficiaries.

Charitable trusts are enforced by the attorney general.
Are charitable trusts subject to the Rule Against Perpetuities?
No, IF AND ONLY IF they fall under the charity to charity exception.
What is the charity-to-charity exception of the Rule Against Perpetuities?
Settlor gives property in a trust to a charitable beneficiary, and the remainderman or one who holds an executory interest IS ALSO a charitable organization.
Can a charitable trust be modified?
Yes. Courts can modify a charitable trust under the doctrine of cy pres ("near as possible") if somethin gis wrong with the trust (ex: the specific named beneficiary no longer exists).
What type of interest does a trust beneficiary hold in the trust?
An equitable interest.
Can a trust beneficiary transfer their interest in the trust?
Generally, yes. Equitable interests are generally freely alienable.
Can an interest that can be voluntarily alienated by a beneficiary be reached by the beneficiary's creditors?
Yes. Any interest that can be voluntarily alienated by the beneficiary may be voluntarily alienated by a creditor of the beneficiary.
What type of interest in the trust property does a beneficiary have once a distribution is made?
Legal interest.

Once a distribution is actually made to a beneficiary, s/he holds a legal interest which will be freely alienable subject to the property rules regarding "restraints on alienation."
What is a spendthrift trust (or a trust with a spendthrift provision)?
The terms of the trust bar the beneficiary (or beneficiaries) from voluntary or involuntary transfer of FUTURE RIGHT TO INCOME/PRINCIPAL.
Under GA law, can one who has a contract claim against the beneficiary of a spendthrift trust force an involuntary transfer of the trust assets? Why?
No.

Why? - The contract creditor has an opportunity to investigate the financial situation of the beneficiary before extending credit.
In GA, what types of creditors can force an involuntary transfer of the assets of a spendthrift trust?

How much of the spendthrift assets can they get (what percentage)?
(1) alimony/child support - up to 50% of the spendthrift assets.

(2) tort judgment - up to 25% of the spendthrift assets.

(3) governmental claim (tax) - up to 25%

(4) judgment for necessaries not voluntarily provided - up to 50%.

Note: If the beneficiary has a physical/mental disability - they are completely protected from involuntary transfer of spendthrift assets.
What is a discretionary trust?
A trust where the trust terms give the trustee leeway over distribution of income and/or principal.
With a discretionary trust, can a beneficiary transfer their interest?

Can a creditor of the beneficiary force an involuntary transfer?
The beneficiary can assign rights to future distribution but CANNOT COMPEL a distribution or interfere with the trustee's discretion absent an abuse of power.

A beneficiary's creditors cannot compel a distribution but can compel that a distribution be made directly to the creditor should a determination to distribute be made, UNLESS the trust also has a spendthrift provision (if so, spendthrift rules apply).
What is a support trust?
A trust whose terms give the trustee a duty to distribute funds for the support or maintenance of the beneficiaries.
What is the special rule for support trusts in GA regarding investigating other resources for support other than the trust?
In GA, the trustee need not investigate other resources for support.
With a support trust, can a beneficiary voluntarily transfer their interest?

Can a creditor of the beneficiary force an involuntary transfer?
A beneficiary cannot assign their interest.

A creditor of a beneficiary cannot compel a distribution be made to the beneficiary. A trust creditor arguably cannot even attach to funds that are distributed either. The creditor possibly could reached distributed funds if the creditor is a support creditor (provided food or shelter).
What does ERISA require and provide protection for when a retirement plan is funded through a trust?
The trust must include a spendthrift clause.

Creditors of the beneficiaries of the trust (the retirees) cannot reach the trust funds becaus efederal law provides a complete protection for the retirement plan UNLESS a "domestic creditor" (ex-spouse or child support claimant) seeks payment with a "QUADRO" (qualified domestic relations order" in hand.
When is the settlor of a trust permitted/not permitted to voluntarily transfer funds from the trust?
(1) he may do so if the trust is revocable and he revokes first.

(2) he may probably do is if the trust is revocable, even if he does not revoke the trust first.

(3) he MAY NOT do so if the trust is irrevocable.
When can a creditor force an involuntary transfer of trust funds by the settlor?
If the settlor can choose to transfer the funds, then the creditor can force an involuntarily transfer.
When can a trustee voluntarily transfer trust funds?

Can a trustee be forced to involuntarily transfer trust funds?
Voluntary: yes, for purposes of the trust, or if the trustee is also the settor/beneficiary and this individual is permitted to transfer trust funds under the trust funds transfer rules.

Involuntary: not on "personal" account, perhaps on "trust" account.
In GA, when can a trust be modified or revoked by the settlor?
In GA, a settlor can modify (alter) or revoke a trust ONLY IF THE TRUST IS REVOKABLE.
In GA, are trusts presumed to be revokable or irrevocable?
Irrevocable, unless the settlor expressly reserved the right to revoke in the trust instrument.
When can a court direct/permit a trustee to modify the terms of a trust?
If it is established through CLEAR AND CONVINCING EVIDENCE that because of circumstances not known or anticipated by the settlor, trust term compliance woudl defeat or substantially impair the accomplishment of the trust's purposes.
When can a court terminate a trust?
(1) costs of administration are defeating the trust purposesl or

(2) trust purposes have been fulfilled/it is illegal or impossible to do so;

(3) due to unanticipated circumstances, continuation would defeat/substantially impair the trust purpose.
When can a court order that multiple trusts be consolidated, or a trust be divided into separate trusts?
If there is good cause AND notice has been given to all beneficiaries, a court may direct either consolidation or division of 2+ trusts (irrespective of whether they all have the same trustee) if doign so woudl not be contrary to the settlor's intent, or would facilitate trust administration, or would be in the beneficiaries' best interest.