LA Bar Wills Trusts and Estates 3 — Questions and Answers
Question 1: Under the Louisiana Trust Code, what written formality is required to create a valid trust instrument?
- It must be entirely handwritten by the settlor
- It must be executed as an authentic act or as a private signature duly acknowledged (Correct answer)
- It must be filed with the clerk of court to become effective
- It must be witnessed by three witnesses and a notary
Correct answer: It must be executed as an authentic act or as a private signature duly acknowledged
Under La. R.S. 9:1752, a trust instrument must be in writing and executed either as an authentic act or as a private signature duly acknowledged.
Question 2: A trustee's duty of loyalty under the Louisiana Trust Code requires the trustee to:
- Benefit from trust transactions only if approved by a majority of beneficiaries
- Administer the trust solely in the interest of the beneficiaries and avoid self-dealing (Correct answer)
- Disclose but not avoid conflicts of interest in trust transactions
- Obtain court approval before making any investment decision
Correct answer: Administer the trust solely in the interest of the beneficiaries and avoid self-dealing
The duty of loyalty requires the trustee to administer the trust solely in the interest of the beneficiaries and to avoid self-dealing transactions.
Question 3: Under the Louisiana Trust Code, which of the following persons lacks the legal capacity to serve as trustee?
- A bank chartered under Louisiana law
- The settlor of an inter vivos trust
- An unemancipated minor (Correct answer)
- A natural person who is domiciled outside Louisiana
Correct answer: An unemancipated minor
An unemancipated minor lacks full legal capacity and therefore cannot serve as a trustee under the Louisiana Trust Code.
Question 4: In a Louisiana discretionary trust, the trustee's primary discretionary authority relates to:
- Deciding whether and in what amounts to distribute trust income or principal to beneficiaries (Correct answer)
- Investing trust assets in high-risk vehicles without beneficiary consent
- Changing the trust's stated charitable purpose without court approval
- Adding or removing beneficiaries without notice to the settlor
Correct answer: Deciding whether and in what amounts to distribute trust income or principal to beneficiaries
In a discretionary trust, the trustee has the power to determine whether distributions will be made and, if so, in what amounts.
Question 5: Under Louisiana law, a spendthrift provision in a trust instrument generally:
- Protects the beneficiary's interest from all creditors without any exceptions whatsoever
- Prevents the beneficiary from voluntarily transferring the interest and protects against most creditor claims (Correct answer)
- Is unenforceable because Louisiana does not recognize spendthrift trusts
- Only protects against creditors of the settlor, not creditors of the beneficiary
Correct answer: Prevents the beneficiary from voluntarily transferring the interest and protects against most creditor claims
Louisiana spendthrift provisions prevent voluntary assignment by the beneficiary and shield the interest from most creditors, though certain exceptions such as support obligations may apply.
Question 6: Unlike private trusts, a charitable trust in Louisiana may:
- Be created orally without any written instrument
- Have a perpetual duration not subject to the durational limits for private trusts (Correct answer)
- Name the settlor as the sole trustee and sole beneficiary simultaneously
- Be revoked by the settlor at any time without court approval
Correct answer: Have a perpetual duration not subject to the durational limits for private trusts
Charitable trusts in Louisiana may be perpetual and are not subject to the durational limitations that apply to private trusts.
Question 7: Upon termination of a Louisiana trust, the trustee's primary obligations are to:
- Immediately liquidate all trust assets and deposit proceeds with the court
- Transfer trust property to the persons entitled to it and render a final accounting (Correct answer)
- File a petition for termination and await court approval before any distribution
- Convert all assets to cash and distribute equal shares to all beneficiaries
Correct answer: Transfer trust property to the persons entitled to it and render a final accounting
When a trust terminates, the trustee must transfer trust property to the appropriate persons and render a final accounting of trust administration.
LA Bar Wills Trusts and Estates 3
Under the Louisiana Trust Code, what written formality is required to create a valid trust instrument?