trusts
What is Income of the Trust and what is principal?
Income: Rents, Cash Dividends (BIG ONES)
random ones- Partnership distrubutions, interest on money obligations owed
to the trustee
Principle: Literally everything else
SALE PROCEEDS, STOCK DIVIDENDS (BIG ONES)
Is this a general power of appointment or a specific power of appointment?
Trustee to pay the income to my son Bob for life and to distribute the principal, during Bob’s life or upon his death, to any or all of his issue as he appoints by a deed of appointment or will, and in the absence of a valid appointment, then upon Bob’s death to distribute the principal to my alma mater, University
SPECIFIC, THE OBJECTS OF THE POWER ARE ONLY BOBS KIDS. HE CANNOT APPOINT ANYONE HE LIKES OTHER THAN SPECIFIC PEOPLE. HERE THOSE PEOPLE ARE SPECIFIED AS HIS "ISSUE"
If i a trustee by the stock of the trust for my individual benefit , is it a violation of the duty of loyalty? What are the options for remedy?
YES, under the no further inquiry rule, we view it as a duty of loyalty violation if the TRUSTEE SELF DEALS.
Remedies 1. sue the trustee for damages
2. Void the sale
ADOPTED CHILDREN CAN TAKE?
What day to corps come into existence under the MBCA?
Corps come into existence the day they are filed
What are the four elements of an express trust and is it subject to RAP?
Settlor, Trustee, ASCERTAINABLE beneficiaries, res. SUBJECT TO RAP
Does a residuary clause with no mention of the power apppointment validly excercise the power of appointment?
MAJORITY RULE: NO! you have to state you are exercising the power of appointment
MINIORITY: if you have the power, its exercised by the transfer with or without the specific language
What is the prudent investor rule?
TRUSTEE HAS A DUTY TO DIVERSIFY THE PORTFOILIO AND REDUCE RISK. THEY WILL NOT BE HELD RESPONSIBLE FOR GENERAL MARKET DECLINES
EXPLAIN DISCRETIONARY TRUSTS AND SPENDTHRIFT PROVISION
Discretionary Trusts:
Spendthrift Provisions:
If you know the corporation isnt filed with the sec and you contract with a company acting like it is, are you personally liable? Are the members of your fake company liable?
YEs, AND NO to other people who didnt know
What are the two elements of a charitable trust and is it subject to RAP?
1. CHARITABLE PURPOSE 2. INDEFINITE BENEFICIARIES
NOT SUBJECT TO RAP
Define Partial Ineffective Exercise of the power of appointment.
Where you appoint just the income rather than both the income and principle for example.
CAN YOU TERMINATE AN IRREVOCABLE TRUST?
Yes, you need consent of all beneficiaries and there can be no material purpose left to be fulfilled.
ALSO U CAN SPLIT IT HOWEVER U WANT TOO ONCE U TERMINATE
IF A TRUST FAILS AND THERES NO WILL?? HOW IS IT DISTRIBUTED?
UPC- Parentelic Parent, then siblings, then nieces and nephews, then uncles and aunts
MODERN RULE: Per capita with rep based on Degrees of consanguinity
YOUR UNCLE AND YOUR NIECE SPLIT under this rule
Explain direct vs derivative suit. Which one requires a demand?
Direct Suit:
Derivative Suit:
WHAT IS CY PRES
If a particular charitable purpose becomes unlawful, impracticable, impossible to achieve, or wasteful: (1) the trust does not fail, in whole or in part; (2) the trust property does not revert to the settlor or the settlor’s successors in interest; and (3) the court may apply cy pres to modify . . . the trust by directing that the trust property be applied or distributed, in whole or in part, in a manner consistent with the settlor’s charitable purposes.”
CLOSE TO THE ORIGINAL PURPOSE AS POSSIBLE
What does a disclaimer do? typical months for a disclaimer?
Treats the beneficiary as if the predecease the testator. 9 months
If you are born to settlor after the trust is created for the benefit of settlors children, and the settlor is still alive, can you take under the class of children?
YES
Can you access a support trust for necessities like child support and hospital bills?
Can the court pierce the trust for hospital bills and child support?
YES AND YES
Explain duty of loyalty and disinterested directors approving an action
Duty of Loyalty:
Disinterested Directors:
A majority of disinterested directors can APPROVE the action taken if they find it was in the best interests of the corp.
Is this a a valid trust?
Trustee shall distribute the income annually among my friends in equal shares, and at the end of 10 years to terminate the trust and add the trust corpus to the principal of Child’s Trust created hereunder.
NO. No ascertainable beneficiary
Is this a valid trust term "for so long as he shall live or until such time as he shall marry”
NO. general restraints on marriage are improper unless the beneficiary is YOUR SPOUSE
Settlor has a trust that explains all assets will be distrubuted to her grandchildren. Her only grandchildren are Carol and Peter. Peter died in an automobile accident survived by his wife, Ginny, but by no descendants. Under Peter’s valid will, his entire estate passed to Ginny.
WHO GETS THE TRUST ASSETS UNDER COMMON LAW WHO GETS IT UNDER UPC?
UPC 2-707:
Survivorship Requirement: This provision addresses the requirement that a beneficiary must survive the settlor or another beneficiary to receive a future interest in a trust.
Substitute Takers: If a beneficiary does not survive the required period, UPC 2-707 provides for your kid to take in your place
COMMON LAW-goes to your estate
CAN CREDITORS GET UR MONEY IF THERE IS AN ABUSE OF DISCRETION YES.
Yes, once there's an abuse of discretion found by the court, the beneficiary can demand payment and thus creditor can access the trust funds.
Can shareholders and directors amend the bylaws? Can shareholders limit directors from amending or appealing?
Shareholders and directors share the power to amend the bylaws UNLESS shareholders have reserved that power for themselves OR they have made a provision that says board of directors cannot amend or appeal