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Question 1
Joseph gives $500 each month to his sister-in-law, Ali. Joseph then devises his property to his children, Lizzie and Marisol, but states: "I request that Lizzie and Marisol . . . pay to Ali $500 as long as she shall live." Joseph did not create a trust for Ali's benefit.
Correct
Incorrect!
Correct Joseph's 'request' created a trust in Ali's favor. This intent was shown by the fact that Joseph had paid that amount to Ali for many years. In addition, Joseph expressed himself clearly by stating the amount and duration of the payments. Plus, since the request was made to his children, Joseph would believe that his words had the force of a command. See, e.g., Spencer v. Childs, 134 N.E.2d 60 (N.Y. 1956).
Incorrect! Joseph's 'request' created a trust in Ali's favor. This intent was shown by the fact that Joseph had paid that amount to Ali for many years. In addition, Joseph expressed himself clearly by stating the amount and duration of the payments. Plus, since the request was made to his children, Joseph would believe that his words had the force of a command. See, e.g., Spencer v. Childs, 134 N.E.2d 60 (N.Y. 1956).
Question 2
Jean-Ren' (JR) tells Britney that he intends to purchase 10,000 shares of Vivendi stock and, when he does, to hold them in trust for her. Two weeks later, JR purchases the stock. JR created a trust for Britney's benefit.
Correct
Incorrect!
Correct Even if JR purchases the shares no trust arises until he declares himself trustee for Britney. The previous declaration of intent was insufficient because at the time he declared his intent, it was for some future rather than present action. A trust requires a present legal transaction.
Incorrect! Even if JR purchases the shares no trust arises until he declares himself trustee for Britney. The previous declaration of intent was insufficient because at the time he declared his intent, it was for some future rather than present action. A trust requires a present legal transaction.
Question 3
Colin's father died three months ago. Colin was the sole beneficiary of his father's will. Not long thereafter, Colin created a trust with respect to "any property I may inherit from my father." The trust is for the benefit of his children. Colin effectively created a trust.
Correct The res of a trust must be existing property at the time of the trust's creation. Here, since Colin's father was already deceased at the time of the trust creation, there is existing property. Although Colin is unaware at the time what property he will receive, since the estate has not yet been administered, the property does exist. As such, Colin effectively created a trust.
Incorrect! The res of a trust must be existing property at the time of the trust's creation. Here, since Colin's father was already deceased at the time of the trust creation, there is existing property. Although Colin is unaware at the time what property he will receive, since the estate has not yet been administered, the property does exist. As such, Colin effectively created a trust.
Correct
Incorrect!
Question 4
In January 2003, Colin decided to establish a trust with respect to "any property I may inherit from my father." At the time of this declaration, his father was still alive. Colin's father died in March 2003. Colin was the sole beneficiary of his father's will. In May 2003, Colin again mentioned his intention of creating such a trust. The trust is for the benefit of his children. The effective date of the trust is:
Correct
Incorrect!
Correct Trust property must exist at the time of the trust's creation. Here, Colin repeated his declaration of trust after the property came into existence at his father's death. Although a trust was created, the later declaration is not retroactive to the earlier expression of intention. As such, the effective date of the trust is May 2003, the date of Colin's reaffirmation of his intention to create a trust. See, e.g., Brainard v. Commissioner of Internal Revenue, 91 F.2d 880 (7th Cir. 1937).
Incorrect! Trust property must exist at the time of the trust's creation. Here, Colin repeated his declaration of trust after the property came into existence at his father's death. Although a trust was created, the later declaration is not retroactive to the earlier expression of intention. As such, the effective date of the trust is May 2003, the date of Colin's reaffirmation of his intention to create a trust. See, e.g., Brainard v. Commissioner of Internal Revenue, 91 F.2d 880 (7th Cir. 1937).
Correct
Incorrect!
Correct
Incorrect!
Question 5
Susan's will leaves certain land in trust for her son, Quentin. She named her brothers, Tyrone and Fabian, as the co-trustees. When Susan died five years later, Tyrone had predeceased her. Her younger brother, Fabian, was 16 years old at the time. What happens with the trust?
Correct
Incorrect!
Correct
Incorrect!
Correct In order to qualify to administer a trust, one of the requirements is that the person must be of legal age. Here, Fabian, who is the remaining trustee named in Susan's will is only 16 years old. The court will not allow the trust to fail for want of a trustee. As such, the court will appoint someone who is of legal age to become the trustee.
Incorrect! In order to qualify to administer a trust, one of the requirements is that the person must be of legal age. Here, Fabian, who is the remaining trustee named in Susan's will is only 16 years old. The court will not allow the trust to fail for want of a trustee. As such, the court will appoint someone who is of legal age to become the trustee.
Question 6
Genie established a trust, giving the trustees the power "to dispose of my property to my children, family and friends as they shall select." Which class of beneficiaries is definite and ascertainable?
Correct
Incorrect!
Correct The beneficiary of a private trust must be a definite person or class of persons. Here, the term 'friends' is too imprecise to fit the definition. Even the term 'family' could be too vague to be upheld. The term 'children' is more definite and certainly ascertainable. See, e.g., Clark v. Campbell, 133 A. 166 (N.H. 1926).
Incorrect! The beneficiary of a private trust must be a definite person or class of persons. Here, the term 'friends' is too imprecise to fit the definition. Even the term 'family' could be too vague to be upheld. The term 'children' is more definite and certainly ascertainable. See, e.g., Clark v. Campbell, 133 A. 166 (N.H. 1926).
Correct
Incorrect!
Question 7
Xavier leaves his estate in trust, the income to be shared equally among his three children, Renata, Irene and Portia "until my youngest grandchild reaches the age of 25." At that time, 1/3rd of the corpus is to be split among Renata and her children, 1/3rd is to be split among Irene and her children and 1/3rd is to continue in trust for Portia (who has no children). There is no residuary provision in the will, if the above bequest fails for any reason. Which gift DOES NOT violate the Rule against Perpetuities?
Correct
Incorrect!
Correct To be valid, a gift must vest (or fail) not later than 21 years after some life or lives in being at the time of the creation of the interest. Here, the gifts to Renata and Irene are clearly invalid because Xavier's youngest grandchild might not be born yet at the time of his death, thereby extending the time period beyond 21 years to the time that person reaches age 25.
Incorrect! To be valid, a gift must vest (or fail) not later than 21 years after some life or lives in being at the time of the creation of the interest. Here, the gifts to Renata and Irene are clearly invalid because Xavier's youngest grandchild might not be born yet at the time of his death, thereby extending the time period beyond 21 years to the time that person reaches age 25.
Correct
Incorrect!
Question 8
Tamora established a trust for the benefit of her son, Marcel: "to Maurice in trust for Marcel." Although Marcel was 22 years old at the time of the trust creation, he was very irresponsible with his money. Tamora's trust would be considered a spendthrift trust.
Correct
Incorrect!
Correct Although no specific language is required to add a spendthrift clause to a trust, the settlor has to clearly indicate that the beneficiary's ability to transfer his interest is limited. Here, Tamora did not indicate in the trust document that Marcel's transferability of his interest was limited. As such, this is not a spendthrift trust.
Incorrect! Although no specific language is required to add a spendthrift clause to a trust, the settlor has to clearly indicate that the beneficiary's ability to transfer his interest is limited. Here, Tamora did not indicate in the trust document that Marcel's transferability of his interest was limited. As such, this is not a spendthrift trust.