FL Trusts - Bar Final Exam Questions
And Revised Answers.
Three Types of Trusts - Answer Express Trust
Resulting Trusts
Constructive Trust
Express Trust (elements needed) - Answer 1. Settlor with capacity to convey
2. Present intent to create a trust relationship
3. Competent Trustee with Duties
4. Definite Beneficiaries
5. Sole Trustee cannot be Sole Beneficiary
6. Property/Res (Trust Property)
7. Valid Purpose
Settlor Must Have Capacity - Answer Capacity required is the same as that required to make a
will.
- Lack of capacity prevents a trust from arising and undue influence, fraud, and duress make a
trust void.
Present Intent to Create a Trust Relationship - Answer *Intent may be with written or spoken
words or by conduct of the settlor -- unless the Statute of Wills (testamentary) or Statute of
Frauds (i.e MYLEGS) applies.*
Communication of intent to the beneficiaries is not necessary.
*Intent must be manifested while the settlor owns the property, and prior to conveyance*
*Intent to make a trust must take effect immediately*
*Precatory language, such as hope wish desire, is insufficient UNLESS:
1. Definite and Precise directions;
,An oral trust of personal property is valid in almost all jurisdictions. - Answer
Custodianship - Answer "T as custodian for the benefit of T Jr."
no trust created here. not the correct intent!
This is a custodianship, which differs from a trust in two ways:
1. only for ONE person
2. expired at the earlier of when the minor dies or reaches age 21.
Competent Trustee with Duties - Answer A trust will not fail for want of a trustee (i.e. if the
trustee dies, resigns, or refuses to accept the position). If any of these happen then the court
will appoint a successor trustee unless it is CLEAR that the settlor would have wanted the trust
to fail if the particular trustee he/she selected was unable or unwilling to serve. (very rare).
Competent Trustee with Duties: Acceptance of the Trusteeship - Answer Acceptance of
Trusteeship: (1) substantially comply with the acceptance terms of the instrument or (2)
accepting delivery of the trust property, exercising powers or performing duties as trustee, or
indicating acceptance.
Competent Trustee with Duties: Duties and Qualifications - Answer Duties: if none are
specified in the trust instrument, the court will imply duties.
Qualifications: anyone who has capacity to acquire and hold property for his own benefit and
has capacity to administer the trust may be a trustee.
Competent Trustee with Duties: Compensation and Reimbursement - Answer Trustee is
entitled to reasonable compensation or to compensation specified in the trust instrument (even
if outrageous).
A trustee is entitled to reimbursement for expenses incurred in the trust's administration and an
other expenses that resulted in a benefit to the trust.
Competent Trustee with Duties: Removal - Answer A court can remove a trustee on its own or
upon request by the Settlor, a Beneficiary, or Co-Trustee.
, 3. Unfitness, unwillingness, or persistent failure to administer the trust. OR
4. Substantial change in circumstances.
Basic thing considered is whether the continuation of the office of the trustee would be
detrimental to the trust.
Competent Trustee with Duties: Disclaimer or Resignation - Answer Before acceptance, a
trustee can disclaim or refuse appointment for any reason. HOWEVER a trustee cannot accept in
part and reject in part.
- Relation Back. For a testamentary trust, the trust is treated as in existence at the time of the
settlor's death and the acceptance of trusteeship relates back to that date. Thus, it is possible
for the acceptance of a trusteeship for a trustee to become liable on tort claims prior to the
time he accepted.
- Resignation: A trustee may resign by either (1) giving 30 days' notice to the qualified (living)
beneficiaries, settlor (if living), and co-trustees OR (2) obtaining court approval.
Definite Beneficiaries (and Disclaimer). - Answer A trust cannot exist without someone to
enforce it.
A qualified beneficiary is someone who is ALIVE AND on the date the beneficiary's qualification
is determined it EITHER a CURRENT BENEFICIARY or A FIRST-LINE REMAINDERMAN
Must be a direct beneficiary
Must be ascertainable. "Friends" is not okay.
Disclaimer: any solvent beneficiary may disclaim an interest in part or in whole by filing a
WRITTEN disclaimer.
- to avoid gift taxes, the disclaimer must be within 9 months of decedent's death and for a
minor it must be no later than 9 months after turning 21.
Definite Beneficiaries: Power of Appointment - Answer T's will left 100,000 dollars "to my
friend L, in trust for my friends"
And Revised Answers.
Three Types of Trusts - Answer Express Trust
Resulting Trusts
Constructive Trust
Express Trust (elements needed) - Answer 1. Settlor with capacity to convey
2. Present intent to create a trust relationship
3. Competent Trustee with Duties
4. Definite Beneficiaries
5. Sole Trustee cannot be Sole Beneficiary
6. Property/Res (Trust Property)
7. Valid Purpose
Settlor Must Have Capacity - Answer Capacity required is the same as that required to make a
will.
- Lack of capacity prevents a trust from arising and undue influence, fraud, and duress make a
trust void.
Present Intent to Create a Trust Relationship - Answer *Intent may be with written or spoken
words or by conduct of the settlor -- unless the Statute of Wills (testamentary) or Statute of
Frauds (i.e MYLEGS) applies.*
Communication of intent to the beneficiaries is not necessary.
*Intent must be manifested while the settlor owns the property, and prior to conveyance*
*Intent to make a trust must take effect immediately*
*Precatory language, such as hope wish desire, is insufficient UNLESS:
1. Definite and Precise directions;
,An oral trust of personal property is valid in almost all jurisdictions. - Answer
Custodianship - Answer "T as custodian for the benefit of T Jr."
no trust created here. not the correct intent!
This is a custodianship, which differs from a trust in two ways:
1. only for ONE person
2. expired at the earlier of when the minor dies or reaches age 21.
Competent Trustee with Duties - Answer A trust will not fail for want of a trustee (i.e. if the
trustee dies, resigns, or refuses to accept the position). If any of these happen then the court
will appoint a successor trustee unless it is CLEAR that the settlor would have wanted the trust
to fail if the particular trustee he/she selected was unable or unwilling to serve. (very rare).
Competent Trustee with Duties: Acceptance of the Trusteeship - Answer Acceptance of
Trusteeship: (1) substantially comply with the acceptance terms of the instrument or (2)
accepting delivery of the trust property, exercising powers or performing duties as trustee, or
indicating acceptance.
Competent Trustee with Duties: Duties and Qualifications - Answer Duties: if none are
specified in the trust instrument, the court will imply duties.
Qualifications: anyone who has capacity to acquire and hold property for his own benefit and
has capacity to administer the trust may be a trustee.
Competent Trustee with Duties: Compensation and Reimbursement - Answer Trustee is
entitled to reasonable compensation or to compensation specified in the trust instrument (even
if outrageous).
A trustee is entitled to reimbursement for expenses incurred in the trust's administration and an
other expenses that resulted in a benefit to the trust.
Competent Trustee with Duties: Removal - Answer A court can remove a trustee on its own or
upon request by the Settlor, a Beneficiary, or Co-Trustee.
, 3. Unfitness, unwillingness, or persistent failure to administer the trust. OR
4. Substantial change in circumstances.
Basic thing considered is whether the continuation of the office of the trustee would be
detrimental to the trust.
Competent Trustee with Duties: Disclaimer or Resignation - Answer Before acceptance, a
trustee can disclaim or refuse appointment for any reason. HOWEVER a trustee cannot accept in
part and reject in part.
- Relation Back. For a testamentary trust, the trust is treated as in existence at the time of the
settlor's death and the acceptance of trusteeship relates back to that date. Thus, it is possible
for the acceptance of a trusteeship for a trustee to become liable on tort claims prior to the
time he accepted.
- Resignation: A trustee may resign by either (1) giving 30 days' notice to the qualified (living)
beneficiaries, settlor (if living), and co-trustees OR (2) obtaining court approval.
Definite Beneficiaries (and Disclaimer). - Answer A trust cannot exist without someone to
enforce it.
A qualified beneficiary is someone who is ALIVE AND on the date the beneficiary's qualification
is determined it EITHER a CURRENT BENEFICIARY or A FIRST-LINE REMAINDERMAN
Must be a direct beneficiary
Must be ascertainable. "Friends" is not okay.
Disclaimer: any solvent beneficiary may disclaim an interest in part or in whole by filing a
WRITTEN disclaimer.
- to avoid gift taxes, the disclaimer must be within 9 months of decedent's death and for a
minor it must be no later than 9 months after turning 21.
Definite Beneficiaries: Power of Appointment - Answer T's will left 100,000 dollars "to my
friend L, in trust for my friends"
