2015 - Mee - Trusts - Modification And Termination Of Trust/trust Administration

Front 1

What are the three requirements to modify a trust?

Back 1

1. All beneficiaries consent
2. No unascertained or incapacitated beneficiaries
3. Objectives of the trust would bedefeated or substantially impaired if the trust is not modified.

Front 2

What is the Claflin Doctrine?

Back 2

The material purpose of the trust comes first,overriding any specific directions in the trust.

Front 3

What is the two-level modification test?

Back 3

1. Find out the material purpose of the settlorregarding trust purposes.
2. Look at specific directions in the trust instrument todetermine whether, because of changes in circumstances,those specific directions in the trust would now frustrate the material purpose

• IF SO, then those directions can be changed by the court.

Front 4

What are the four requirements for Uneconomical Trust Termination?

Back 4

1. market value is less than $100k
2. costs of continuing the Trust will substantially impair accomplishing the Trust purpose
3. Beneficiaries consent
4. If there is a trustee that is also an income trustee, beneficiary has a co-trustee terminate
   

Front 5

What are the three sources of a Trustee's power?

Back 5

1. Terms of Trust
2. Statute
3. Court Decree
   

Front 6

What are the six main things a Trustee can do?

Back 6

1. Sell any personal or real property
2. Mortgage property
3. lease property
4. make ordinary repairs
5. contest, compromise or settle claims
6. do almost anything to manage the corpus
   

Front 7

What are the three things a trustee cannot do?

Back 7

1. Engage in self-dealing
2. Borrow money
3. Continue a business
   

Front 8

What is Trustee liability for continuing a business?

Back 8

Liable for losses unless court approval to continue business

Front 9

What are the five prohibitions on self dealing?

Back 9

1. Cannot buy or sell trust assets to him or herself
2. Cannot borrow trust funds
3. Cannot lend money to the trust
4. Cannot take advantage of confidential information (profit)
5. Corporate trustee cannot buy its own stock as a trust investment
   

Front 10

What are the two affirmative duties on self-dealing?

Back 10

1. Segregate trust assets from personal assets
2. Earmark trust assets by titling them in trustee's name
   

Front 11

What are the beneficiary's two options when Trustee breaches duty?

Back 11

1. Sue to remove trustee
2. Ratify transaction
   

Front 12

What is the no further inquiry rule?

Back 12

Breach of a fiduciary duty by engaging in self-dealing is anautomatic wrong and no further inquiry need be made.

• Good faith and reasonableness are not a defense
  

Front 13

What is the rule for action against a 3rd party when there is self-dealing?

Back 13

If trustee engages in a prohibited transaction, such as self-dealing, and sells trust property to a third party, the beneficiary cannot sue the purchaser of property from the trustee if that purchaser was a bona fide purchaser (BFP) for value without notice.

Front 14

What is the rule for indirect action for self-dealing?

Back 14

Third parties that are a relative of trustee or business to which trustee is an officer are never BFPs

Front 15

What are the four things an exculpatory clause cannot shield a trustee from?

Back 15

1. Bad faith
2. Intentional breach of trust
3. Recklessness; OR
4. abuse of a confidential relationship