Bar Exam Bar Exam Wills, Trusts & Estates 2 — Questions and Answers
Question 1: Which of the following is NOT a required element for a valid express trust?
- A trustee with legal capacity
- Trust property (res) transferred to the trust
- A definite beneficiary or charitable purpose
- A written instrument signed before a notary public (Correct answer)
Correct answer: A written instrument signed before a notary public
Express trusts do not require a notarized writing; the essential elements are a trustee, identifiable trust property, and a definite beneficiary or charitable purpose.
Question 2: A spendthrift clause in a trust instrument is designed primarily to:
- Allow the trustee to terminate distributions if a beneficiary is irresponsible
- Prevent beneficiaries from alienating their interest and creditors from reaching it before distribution (Correct answer)
- Limit distributions to amounts actually needed for support or education
- Require court approval before any invasion of trust principal
Correct answer: Prevent beneficiaries from alienating their interest and creditors from reaching it before distribution
A spendthrift clause restrains a beneficiary's power to assign their interest and prevents creditors from attaching the interest before it is distributed.
Question 3: Under the Uniform Trust Code, the trustee's duty of loyalty requires the trustee to:
- Administer the trust solely in the interest of the beneficiaries, avoiding conflicts of interest (Correct answer)
- Maximize investment returns regardless of risk to principal
- Treat all current and remainder beneficiaries with strict equality
- Follow the settlor's instructions even if compliance harms the beneficiaries
Correct answer: Administer the trust solely in the interest of the beneficiaries, avoiding conflicts of interest
The duty of loyalty requires the trustee to act exclusively for the benefit of the beneficiaries and to avoid transactions in which personal interests conflict with trust interests.
Question 4: Under the cy pres doctrine, a court modifies a charitable trust when the charitable purpose becomes:
- More expensive than the settlor originally anticipated
- Impossible, impractical, or illegal to fulfill (Correct answer)
- Less fashionable or no longer preferred by the community
- Partially accomplished and surplus funds remain
Correct answer: Impossible, impractical, or illegal to fulfill
Cy pres authorizes a court to modify a charitable trust to apply assets to a purpose as near as possible to the original when the original purpose becomes impossible, impractical, or illegal.
Question 5: A resulting trust arises by operation of law when:
- A trustee wrongfully acquires property from a beneficiary through undue influence
- A trustee breaches the duty of loyalty by engaging in self-dealing
- An express trust fails entirely or does not exhaust all trust property (Correct answer)
- A beneficiary dies before the trust terminates and no alternate taker is named
Correct answer: An express trust fails entirely or does not exhaust all trust property
A resulting trust arises when an express trust fails or trust property is not fully disposed of, returning the beneficial interest to the settlor or the settlor's estate.
Question 6: A revocable living trust typically becomes irrevocable upon:
- The transfer of the first significant asset into the trust
- Execution and signing of the trust agreement by the settlor
- The settlor's death as specified in the trust instrument (Correct answer)
- Registration of the trust instrument with the probate court
Correct answer: The settlor's death as specified in the trust instrument
A revocable living trust becomes irrevocable upon the settlor's death, at which point the trustee administers and distributes assets according to the trust terms.
Bar Exam Bar Exam Wills, Trusts & Estates 2
Which of the following is NOT a required element for a valid express trust?