Trusts Final Exam Quiz

<p>The trust becomes ineffective. (A)</p> Signup and view all the answers

<p>They require consideration to be enforceable. (A)</p> Signup and view all the answers

<p>A certificate of deposit from a bank (C)</p> Signup and view all the answers

<p>It's considered a gratuitous promise. (A)</p> Signup and view all the answers

<p>It must be supported by consideration. (D)</p> Signup and view all the answers

<p>Become the trustee of trusts previously held by a target corporation. (A)</p> Signup and view all the answers

<p>A beneficiary holds equitable title and can enforce fiduciary duties against the trustee. (A)</p> Signup and view all the answers

<p>Beneficiaries must be clearly ascertainable from the trust instrument. (D)</p> Signup and view all the answers

<p>Honorary trusts cannot be enforced by a human or charity, leading to reversion of property. (C)</p> Signup and view all the answers

<p>Legal entities such as corporations, partnerships, and governmental units. (B)</p> Signup and view all the answers

<p>The trust will fail due to lack of certainty. (C)</p> Signup and view all the answers

<p>Minnesota is the only state that does not provide for trusts for pets. (D)</p> Signup and view all the answers

<p>It does not need to be probated. (C), It becomes effective immediately. (D)</p> Signup and view all the answers

<p>It incurs immediate expenses. (C)</p> Signup and view all the answers

<p>It must have property to pay premiums. (D)</p> Signup and view all the answers

<p>Change the beneficiaries at will. (D)</p> Signup and view all the answers

<p>The trust cannot be established. (B)</p> Signup and view all the answers

<p>Insurance premiums may go unpaid. (B)</p> Signup and view all the answers

<p>The trustee's willingness to accept the role. (A)</p> Signup and view all the answers

<p>It keeps life insurance proceeds out of the taxable estate. (C)</p> Signup and view all the answers

<p>To manage the trust with a high standard of care. (D)</p> Signup and view all the answers

<p>Liability or penalties for the trustee. (D)</p> Signup and view all the answers

<p>When acting with a state of mind worse than negligence. (D)</p> Signup and view all the answers

<p>Defend the trust unless advised otherwise by a competent attorney. (D)</p> Signup and view all the answers

<p>Taking personal ownership of the trust property. (C)</p> Signup and view all the answers

<p>Balancing risk and return in trust investments. (D)</p> Signup and view all the answers

<p>The existence of reasonable grounds for appeal. (D)</p> Signup and view all the answers

<p>Judicial powers (C)</p> Signup and view all the answers

<p>When reasonably necessary in the administration of the trust (B)</p> Signup and view all the answers

<p>Decision to invest trust funds (C)</p> Signup and view all the answers

<p>Notify the beneficiaries at least 30 days prior (B)</p> Signup and view all the answers

<p>To carry out the purpose of the trust (D)</p> Signup and view all the answers

<p>May be delegated but with restrictions (C)</p> Signup and view all the answers

<p>Powers necessary to fulfill the trust's purpose (B)</p> Signup and view all the answers

<p>Delegation is allowed if prudent trustees would do the same (D)</p> Signup and view all the answers

<p>The remaining trust property is distributed to the designated beneficiary. (C)</p> Signup and view all the answers

<p>The trust benefits a minority group previously subjected to discrimination. (B)</p> Signup and view all the answers

<p>It is synonymous with an inter vivos gift. (D)</p> Signup and view all the answers

<p>Committing a tortious act. (D)</p> Signup and view all the answers

<p>Examining the long-term effects and intentions for society. (B)</p> Signup and view all the answers

<p>The settlor transfers property that restricts creditor access. (B)</p> Signup and view all the answers

<p>Restricting a beneficiary from remarrying. (B)</p> Signup and view all the answers

<p>Discriminatory restrictions can be valid if they serve the public interest. (C)</p> Signup and view all the answers

A trust established through a will, taking effect upon the settlor's death. The transfer of title occurs only at the time of death.

Not needed for creating a valid trust; a trust is a gift, not a contract. However, a promise to create a future trust does need consideration to be enforceable.

A trust that cannot be revoked after it's established, regardless of the circumstances.

A promise held as trust property must be a legally binding contract, supported by consideration, to be valid.

The settlor retains some legal title and imposes fiduciary duties to the trustee, but the equitable title is transferred.

A valid will does not automatically ensure a valid testamentary trust. Each part of the trust needs independent validity.

Trust property must have value; a financial institution's commitment to repay money (e.g., a certificate of deposit) is considered trust property, a friend's promise isn't.

Requires consideration to be enforceable; similar to any other agreement to make a gift.

A trust can be created for any lawful purpose but cannot require the trustee to commit crimes, torts, or violate public policy.

The trust's intent and effect on how people act is considered, particularly if it encourages crime or wrongdoing by creating incentives.

Trustees cannot commit crimes, torts, or acts against public policy.

Judges check likely consequences for trust creation, whether it increases likelihood of crimes or harms others through behavior.

Private discrimination is allowed, but courts won't enforce discriminatory trust provisions; illegal restrictions are removed or trusts voided.

Settlor's gifts or trust creations to avoid creditors (or make it harder to pay) might be challenged using the Uniform Fraudulent Transfer Act.

A trust created during the grantor's lifetime—equivalent to a gift.

A trust created in a will and becoming effective upon death; requires the correct legal mental capacity.

A trust with assets specifically designated to cover premiums. It requires trustee management.

A trust with no upfront assets for premium payments. It's simple but risky.

A trust that holds a life insurance policy to avoid estate taxes. It requires a three-year waiting period.

A trustee must actively accept the position before taking on fiduciary duties. There is no forced acceptance.

A Texas law allowing a subsidiary company to replace an affiliated bank as trustee in mergers, acquisitions, or buyouts. This act allows the acquiring corporation to become trustee of trusts previously held by the target company.

A beneficiary holds the equitable title to trust property. This means they have the right to benefit from the trust, and the trustee has a fiduciary duty to manage the assets in the beneficiary's best interest. A beneficiary can sue the trustee for breaches of fiduciary duty.

Multiple beneficiaries who are all concurrently entitled to distributions from the trust.

Multiple beneficiaries where one receives income during their lifetime, and the remaining trust assets go to another beneficiary upon their death.

The legal ability to own and hold property. This does not require the ability to transfer property, so minors or incompetent persons can still be beneficiaries.

Trust documents must clearly identify who the beneficiaries are. If the beneficiaries are not clearly identifiable, the trust may fail.

A trust lacking a human beneficiary or charitable purpose. Examples include trusts to care for a pet, say masses, or erect monuments. Without a beneficiary with legal standing, the trustee is obligated to carry out the settlor's wishes only on their honor.

Traditional approach to honorary trusts considers them invalid, while modern trends may allow for certain types, like trusts for pets. This difference often depends on individual state laws.

A trustee must exercise a high standard of care when managing trust property, similar to a prudent person managing their own assets. Failure to meet this standard can lead to personal liability.

A trustee has a strict obligation to act in the best interests of the beneficiaries, avoiding self-dealing and conflicts of interest.

A trustee can be held personally liable for failing to meet the standard of care or fiduciary duties, including civil and criminal penalties.

The trustee must invest trust property in a way that generates income while protecting it from excessive risk. They are not insurers of trust success.

The majority rule for trust investments, requiring the trustee to act like a prudent investor, considering risk, return, and diversification.

The trustee has a duty to defend the validity of the trust and its administration, even if it means incurring legal fees.

Trustees are not guarantors of the trust's value, meaning they are not liable for losses solely due to market fluctuations, only breaches of their duties.

Trustees must take reasonable steps to safeguard trust property, like storing valuables and insuring assets.

A trustee may be appointed to act in another state, especially for real estate, to carry out the trust's purpose.

A trustee can investigate environmental issues before accepting a trust's assets, protecting themselves and the beneficiaries.

A trustee has necessary powers to successfully carry out the trust's purpose, even if not explicitly stated by the settlor.

A court can modify a trustee's powers, adding or limiting them, to ensure trust objectives are met.

Trustees can only delegate ministerial tasks, not discretionary decisions like investing trust funds.

Trustees can delegate investment decisions to an investment agent, but with notice to beneficiaries and liability.

Trustees may delegate any investment or management decision if a prudent trustee with similar skills would also delegate.

The rules for delegating trustee powers have evolved to balance efficiency while safeguarding the trust's interests.