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65 Cards in this Set
- Front
- Back
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REQUIREMENTS FOR A TRUST: When is an inter vivos trust made?
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During the life of the Settlor.
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REQUIREMENTS FOR A TRUST: What are the (7) Requirements of a valid trust?
[S.D.P.T.B.I.L.] |
1. Settlor, 2. Delivery, 3. Property, 4. Trustee, 5. Beneficiary, 6. Intent, 7. Lawful Purpose.
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REQUIREMENTS FOR A TRUST: Does a trust instrument have to be in writing and signed by the Settlor?
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Yes.
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REQUIREMENTS FOR A TRUST: Who can be a Settlor?
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Anyone! (18 yrs old of sound mind with capacity to hold property).
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REQUIREMENTS FOR A TRUST: If a Settlor puts his house in trust, is this a valid Delivery?
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No. Titled assets must be formally transferred.
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REQUIREMENTS FOR A TRUST: If I put "whatever money or property that I may choose to contribute to the trust over the next 5 years", is this "property"?
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No. You must identify the property. It also cannot be a mere expectation of ownership.
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REQUIREMENTS FOR A TRUST: If you fail to appoint a trustee, does the trust fail?
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No. The court can appoint anyone that is 18 with "good moral character"
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REQUIREMENTS FOR A TRUST: In regards to the "beneficiary" requirement of a valid trust, what must the beneficiaries be?
- does "family" or "next of kin" work? |
Beneficiaries MUST be: "definite" and "ascertainable."
- however, Family or Next of Kin will work. |
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REQUIREMENTS FOR A TRUST: What must a Settlor "intend" to do?
- Does the word "trust" show intent? |
he must "intend" to create an enforceable obligation.
- No. Look at all the language, and all of the facts to determine intent. |
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REQUIREMENTS FOR A TRUST: If a trustee has no duties, what is this called?
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A "Passive Trust"
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REQUIREMENTS FOR A TRUST: What are the three main examples of a trust having an "unlawful purpose"?
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1. calling for the commission of a crime,
2. calling for the destruction of property, 3. against public policy (like promoting divorce or restricting marriage). |
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TYPES OF TRUSTS: What is the main requirement of a "Revocable Lifetime Trust"?
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That the Settlor CANNOT be the ONLY Beneficiary.
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TYPES OF TRUSTS: What are the three (3) benefits of a "revocable lifetime trust"?
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1. manages assets efficiently (especially using a professional trustee);
2. avoids guardianship in case of incapacity; and, 3. avoids probate. |
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TYPES OF TRUSTS: What is the major downside to a "Revocable Lifetime Trust"?
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Revocable Lifetime Trusts do not avoid estate taxes! - The full amount will be included in the settlor's gross estate.
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TYPES OF TRUSTS: What is a "Pour-Over" gift?
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It is a testamentary gift to an existing revocable trust.
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TYPES OF TRUSTS: What is the key requirement of a "Pour-Over" trust gift?
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- The trust must be in existence or executed concurrently with the will.
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TYPES OF TRUSTS: How do you create a trust that is the beneficiary of your Life Insurance Proceeds? (2) Ways:
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1. create a revocable unfunded insurance trust, and name the trustee as policy beneficiary.
2. "testamentary" life insurance trust, and name beneficiary in your will. |
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The Totten Trust: What is another name for the Totten Trust?
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- Bank Account Trust
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The Totten Trust: What is a Totten Trust?
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- A bank account in the depositor's name "as trustee for" a named beneficiary.
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The Totten Trust: When does the beneficiary have a beneficial interest in the Totten trust?
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When the depositor dies.
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The Totten Trust: Can a depositor make deposits and withdrawals throughout their lifetime as they wish?
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Yes.
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The Totten Trust: What are the four (4) ways to revoke a Totten Trust?
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1. withdraw all funds,
2. express revocation (notarized), 3. revocation by will, 4. death of the beneficiary |
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The Totten Trust: Do the depositor's creditors have access to Totten Trust account?
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Yes.
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Joint Bank Account Trusts: What interest does each "joint-account" owner have on the account?
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50% (unless one person makes the entire deposit... then that deposit is considered a gift to the other holder).
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Joint Bank Account Trusts: Is there a "right of survivorship"?
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Yes.
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Joint Bank Account Trusts: Can you challenge the "right of survivorship"?
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RARELY!
Only by clear and convincing evidence that there was no intent of survivorship. Very hard to do. |
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Uniform Transfers to Minors Act: Three (3) reasons to make a gift to a minor under UTMA?
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1. avoids guardianship
2. avoids a trust 3. qualifies for the $12,000 annual exclusion in federal gift tax. |
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Uniform Transfers to Minors Act: Who are the gifts made to?
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- A custodian
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Uniform Transfers to Minors Act: What must you do to give a gift under this Act?
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1. give to custodian,
2. put it in writing, and 3. mention "UTMA"! |
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Uniform Transfers to Minors Act: What are the duties of a "custodian"?
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1. manage property as prudent person.
2. pay to the minor per their needs 3. distribute principal at age 21. |
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Uniform Transfers to Minors Act: What happens if the donor names himself as the custodian?
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- It is included in the gross estate for estate taxes.
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Charitable Trusts: What are the five (5) things to remember about charitable trusts?
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1. Large group of "indefinite" beneficiaries.
2. Charitable purpose 3. Not subject to RAP 4. Cy Pres can be used to change them. 5. The AG has the responsibility of representing the beneficiaries. |
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Charitable Trusts: What is does a "reasonably large group of indefinite beneficiaries" mean?
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- you cannot have specific, named persons as beneficiaries.
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Charitable Trusts: What are the most common types of charitable trusts?
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health, education, and religion
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Charitable Trusts: Can a charitable trust be perpetual?
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Yes. They do not violate the RAP.
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Charitable Trusts: What is "Cy Pres"?
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- if the stated purpose of the trust can no longer be accomplished... the court can change the trust to be as "near as possible" to settlor's intent.
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Charitable Trusts: Who are the indispensable parties to a charitable trust lawsuit? - Who has standing?
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1. The Attorney General
2. The AG and the Donor |
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TYPES OF TRUSTS: What is an Honorary Trust?
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Non-Human Beneficiary.
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TYPES OF TRUSTS: How long is a Honorary Trust valid for?
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21 Years.
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TYPES OF TRUSTS: How long is a "Pet Trust" valid for?
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- the life of the donor's pets alive during the donor's lifetime.
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NON-TRUSTS: What is a Constructive Trust?
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- An equitable remedy designed to disgorge unjust enrichment that results from wrongful conduct.
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NON-TRUSTS: What is the typical Oral Trust situation?
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- deed of land by grantor to grantee, but someone claims that grantee said he would hold property for the grantor's purposes.
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NON-TRUSTS: What are the only two situations where an oral trust will be given any consideration by the court?
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1. Fraud in the inducement
2. Where there is a confidential relationship between grantor and grantee. |
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NON-TRUSTS: What are the five (5) examples of a "confidential relationship"?
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1. family
2. partner 3. attorney 4. priest 5. fiduciary |
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Spendthrift Clauses: What is the purpose of a "spendthrift clause"?
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- to protect the beneficiary from creditors.
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Spendthrift Clauses: What does a spendthrift clause do?
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protects the beneficiaries by prohibiting voluntary or involuntary transfers.
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Spendthrift Clauses: What are the two main exceptions as to what creditors can bypass a spendthrift clause?
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1. Child Support and Alimony
2. Federal Tax Liens |
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Spendthrift Clauses: Does a spendthrift clause protect the interest gained on the principal of the trust?
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NO
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MODIFICATION AND TERMINATION OF TRUSTS: When is a modification of a trust appropriate?
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Only when the objectives of the trust would be substantially impaired if left unmodified.
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MODIFICATION AND TERMINATION OF TRUSTS: Two (2) Step Modification Test:
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1. the original intent of the settlor, and
2. is that intent substantially impaired? |
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MODIFICATION AND TERMINATION OF TRUSTS: When can a court invade the principal of the trust?
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Only when the trust income is not enough to carry out the settlor's purpose of the trust.
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MODIFICATION AND TERMINATION OF TRUSTS: What is the requirement for a termination of a trust?
- Major exception? |
- express termination provision in original trust.
- only if all beneficiaries consent. |
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TRUST ADMINISTRATION: What are the two (2) main things a trustee must NEVER do?
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1. engage in self-dealing.
2. continue business with the trust without court approval. |
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TRUST ADMINISTRATION: Five (5) Prohibitions on Self-Dealing?
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1. buy or sell trust assets to himself.
2. borrow trust funds. 3. lend money to the trust 4. profit from serving as trustee 5. corporate trustee cannot buy its own stock as an investment. |
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TRUST ADMINISTRATION: Two (2) affirmative responsibilities of the trustee in maintaining trust property?
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1. No Commingled Property
2. Earmark Trust Assets |
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TRUST ADMINISTRATION: What is the remedy for commingled trust funds?
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If assets go down... trustee's personal funds were used.
If assets go up... trust funds were used. |
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TRUST ADMINISTRATION:Three (3) Remedies for breach of fiduciary duties?
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1. sue to remove the trustee
2. ratify the transaction, and waive breach. 3. sue for any loss. |
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TRUST ADMINISTRATION: Is good faith or reasonableness a defense for breach of fiduciary duty?
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no.
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TRUST ADMINISTRATION: Trustee's Contract liability... What is the key?
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How the trustee signed the contract. As himself? or As Trustee?
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TRUST ADMINISTRATION: Tort Liability... What will the trustee be liable for?
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All the torts of himself, and those of his employees.
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TRUST INVESTMENT: What is the law that governs trust investment in Indiana?
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UPIA: Uniform Prudent Investor Act.
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TRUST INVESTMENT: What is the main thrust of UPIA?
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the "modern portfolio" theory of investment (creates investment strategy).
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TRUST INVESTMENT: Two (2) key factors of UPIA?
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1. Trustee must consider each investment's "role" in the strategy, and
2. must consider the expected total return from income and capital gain. |
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TRUST INVESTMENT: How do you measure prudence?
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Not by hindsight.
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TRUST INVESTMENT: What is the main goal of UPIA?
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flexibility to shape strategy for maximum return.
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