Week 8 Class Notes - Test 2

Question 1

A living trust is a (1), (2) trust.

Answer 1

1. revokable (can be cancelled, rescinded, invalidated at ANY TIME)
2. intervivos (“between the living” - MADE and TAKES EFFECT while grantor is alive)

Question 2

3 interchangeable terms for the one who establishes the living trust

Answer 2

1. trustor
2. grantor
3. settlor

Question 3

A trustee is a (1) or (2) who assumes (3) to the (4).

Answer 3

1. person
2. entity
3. legal title
4. trust property (everything held in trust)

Question 4

5 terms for entirety of trust property

Answer 4

1. corpus (most common)
2. trust corpus
3. trust res
4. trust principal
5. trust estate

Question 5

A beneficiary is a (1) who holds (2) to the trust property.

Answer 5

1. person

2. equitable title

Question 6

When the testatory to a will dies, the will goes into effect (1), although (2)

Answer 6

1. immediately

2. it may take awhile to transfer in probate

Question 7

The grantor to a trust can determine (1) the property gets transferred, which helps with (2), in the sense that (3) and (4). However, trusts are much more (5) than wills.

Answer 7

1. when
2. asset protection
3. creditors cannot reach the trust assets
4. heirs must wait until a certain age
5. expensive

Question 8

Drafting a trust is very specialized, and it’s helpful to have a backgorund in (1). A trust pays taxes the way a (2) does. Estate taxes are exempt up to (3), and it’s important to know limits such as these. It also helps to have knowledge about (4).

Answer 8

1. income tax
2. corporation
3. 5 million
4. property tax

Question 9

A trust is a (1) in which the (2) transfers specific property to the (3) who holds (4) to that property for the benefit of the (5) who hold (6).

Answer 9

1. fiduciary relationship
2. trustor
3. trustee
4. legaltitle
5. beneficiary (ies)
6. equitable title

Question 10

A trust is a form of ownership of property which separates (1) and (2) of the property from (3). A trust requires this separation; without it, (for example, if the (4) and (5) are the same), then the titles (6) and there is no trust.

Answer 10

1. control
2. ownership
3. benefit of ownership
4. trustee
5. beneficiary
6. merge

Question 11

Legal title is held by the (1). Another example of legal title is found in (2)

Answer 11

1. trustee

2. seller loans (sellers holds title until paid off, otherwise can take back AND keep all payments as rent)

Question 12

Equitable title is held by the (1) until the (2) is handed over by the trustee according to trust specifications, at which time the trust (3). Another example of equitable title is (4).

Answer 12

1. beneficiary
2. corpus
3. terminates
4. the buyer who is making payments and does not have legal title yet

Question 13

The trustee holds “(1)” legal title, which means no creditors of the (2) can get at it.

Answer 13

1. bare

2. trustee

Question 14

To create a living trust, the trustor must (1)–in other words, there is no trust until there is a (2). The trustor does not get to (3) once the trust is in place.

Answer 14

1. transfer property to the trustee
2. corpus
3. possess the property

Question 15

5 requirements for a trust

Answer 15

1. trustor
2. trustee (if none exists, the courts will appoint)
3. beneficiaries
4. trust property
5. trust purpose

Question 16

Administration of a trust costs money, which will come from (1)

Answer 16

1. the trust

Question 17

Historically tehre was a rule against (1), meaning (2) had to end–(3) were different. Historically that limitation was (4) after the (5) of the (6). Now, it is sort of done away with–the limitation is (7).

Answer 17

1. perpetuities
2. private trusts
3. charitable trusts
4. 21 years
5. death
6. last beneficiary
7. 500 years

Question 18

Trusts are (1) in that you can include almost any (2). This is different than wills which deal simply with (3). Trusts are subject to (4) and (5).

Answer 18

1. contracts
2. terms and conditions
3. transfer of property
4. legality
5. public policy (no undue influence, fraud, etc.)

Question 19

A trustor must have the capacity to (1), meaning he must have (2) and (3). Additionally, he must have the (4) and (5) to transfer property. A trustor does not have to be an (6).

Answer 19

1. contract
2. legal age
3. sound mind
4. power
5. authority (e.g., no JTWROS)
6. individual (an be a corporation or partnership)

Question 20

A trustor can name himself as the (1) but this will incur (2) so an (3) would be most appropriate. A trustor who does this cannot also be (4). A (5) can be a trustee as long as he is (6), as with contracting, but it is not a good idea. You can also have (7) trustees.

Answer 20

1. trustor
2. tax consequences
3. irrevocable trust
4. sole beneficiary (if sole trustee)(cannot be trustor, SOLE bene, SOLE trustee)
5. minor
6. emancipated
7. multiple

Question 21

Only the (1) can enforce the duties of the trustee–not even the (2) can!

Answer 21

1. beneficiaries

2. trustor

Question 22

Under the Probate Code, the trustee must administer the estate as (1). The question asked is, (2)? Any (3) must be applied. The trustor may relax standards on the trustee, but only insofar as (4). The trustee has a (5) to the beneficiaries, as well as an (6) and a duty to (7).

Answer 22

1. a prudent person
2. hat would you do with your own money?
3. special skills (e.g., if trustee is a bank)
4. the Probate Code is followed
5. duty of loyalty
6. impartiality duty (no preference for certain benes)
   7 keep beneficiaries informed

Question 23

The trustee may not (1), (2), (3) or (4) trust property–otherwise beneficiaries may (5)–and the trustee must (6).

Answer 23

1. sell
2. buy
3. borrow
4. lease
5. collect the value of the property lost
6. make the property productive (invest cash, rent property)

Question 24

The trustee can (1) duties but may not (2), or else (3)

Answer 24

1. delegate
2. delegate all of them
3. the trustee becomes responsible for errors

Question 25

The trustee can exercise powers given only by (1) or by the (2). This includes (3) and (4).

Answer 25

1. law 2. trust instrument 3. imperative powers (no choice)(e.g., how much to distributed to benes--if not enough money, must liquidate or get protection from court) 4. discretionary powers (e.g., what to invest in)(more common than imperative)

Question 26

In the case of (1)--3+ trustees--discretionary powers are dependent on the (2)

Answer 26

1. joint trustees | 2. majority

Question 27

In making investment decisions, the trustee owes a duty to both (1) and (2)

Answer 27

1. income beneficiaries | 2. remainderman beneficiaries (entitled to estate after purpose of trust is complete)

Question 28

A trustee must have (1), or else the trust fails as a (2).

Answer 28

1. duties | 2. passive trust

Question 29

If there are two or more trustees, they are (1) as required by (2) in Arizona. The rule is the same for (3)

Answer 29

1. joint tenants with right of survivorship 2. statute 3. spouse co-trustees

Question 30

You must be (1) as a trustee. To get out of being a trustee, you need a (2). A trustee is a (3) and owes a duty to act in (4) and in the (5)

Answer 30

1. compensated 2. court order 3. fiduciary 4. good faith 5. best interests of the benes

Question 31

Beneficiaries are (1)--they enjoy the (2) and are the (3) of the trust. The beneficiary must be (4) by an (5). Joint beneficiaries own the benefit as (6).

Answer 31

1. cestui que 2. benefits 3. purpose 4. ascertainable 5. objective standard 6. tenants in common

Question 32

A trust purpose can exist for (1) but it fails if it is a (2), (3), to (4) or if it is against (5).

Answer 32

1. almost any reason 2. crime 3. tort 4. defraud creditors 5. public policy (e.g., conditional upon divorce, prohibitive of a marriage)

Question 33

(1) cannot be reached by creditors while the money is in trust

Answer 33

1. Spendthrift trusts

Question 34

A n express trust arises with an (1) to create the (2). A trust can be oral insofar as it complies with the (3). A (4) is oral.

Answer 34

1. express intention 2. trust relationship 3. Statute of Frauds 4. Totten Trust

Question 35

6 requirements of an oral trust

Answer 35

1. present intent (not for a future time, except testamentary trusts) 2. does not requrie the word trust but there can be no doubt that it is one 3. must include intent to impose enforceable duties on the trustee (no precatory language, which doesn't impose a duty) 4. trustor has no power to supervise the trustee 5. cannot hold something in trust for oneself--title merges 6. need specific, undefinable property (e.g., "most of" a certain fund)(???!)

Question 36

Implied trusts happen (1). Two examples are the (2) and the (3).

Answer 36

1. by operation of law 2. resulting trust 3. constructive trust

Question 37

A resulting trust pulls from the (1). The trustee continues serving until (2). He holds legal title but (3).

Answer 37

1. presumed intent of the property owner 2. the court decides what to do 3. nobody holds equitable title

Question 38

Constructives trusts have to do with (1) and prevent, for example, (2) and (3).

Answer 38

1. wrongdoing (trustee, bene) 2. fraud 3. unjust enrichment (e.g., in undue influence)