SC Bar Wills Trusts and Estates 3 — Questions and Answers
Question 1: Under the South Carolina Trust Code, is a trust presumed revocable or irrevocable when the instrument is silent?
- Irrevocable, following the common law rule
- Revocable, unless the terms expressly provide otherwise (Correct answer)
- Revocable only if the settlor is also trustee
- Irrevocable unless the trust holds real property
Correct answer: Revocable, unless the terms expressly provide otherwise
South Carolina adopted the Uniform Trust Code presumption that a trust is revocable unless its terms expressly state it is irrevocable.
Question 2: Which of the following is NOT required to create a valid private express trust in South Carolina?
- A definite beneficiary or a valid exception
- Trust property
- Intent to create a trust
- A written instrument signed by two witnesses (Correct answer)
Correct answer: A written instrument signed by two witnesses
An oral trust of personal property can be valid if proven by clear and convincing evidence; witnessed writings are a will requirement, not a trust requirement.
Question 3: A South Carolina spendthrift trust prohibits beneficiaries from transferring their interests. Which creditor can still reach the beneficiary's interest?
- A credit card company
- A beneficiary's child with a support order (Correct answer)
- A business partner with a judgment
- An unsecured personal lender
Correct answer: A beneficiary's child with a support order
Under the SC Trust Code, spendthrift protection does not bar claims for child support or alimony, which are exception creditors.
Question 4: A trustee in South Carolina invests the entire trust corpus in a single speculative stock. Under the prudent investor rule, what is the primary problem?
- Trustees may never buy stock
- Failure to diversify the trust portfolio (Correct answer)
- Failure to obtain court approval
- Failure to obtain beneficiary consent
Correct answer: Failure to diversify the trust portfolio
The prudent investor rule requires diversification and evaluates decisions in the context of the whole portfolio, making concentration in one speculative asset a breach absent special circumstances.
Question 5: A charitable trust in South Carolina was created to fund a specific hospital that has since closed. What doctrine allows a court to redirect the funds to a similar charitable purpose?
- Cy pres (Correct answer)
- Ademption
- Equitable conversion
- Resulting trust doctrine
Correct answer: Cy pres
Cy pres permits a court to modify a charitable trust whose purpose has become impossible or impracticable by applying the property to a purpose approximating the settlor's intent.
Question 6: Under the South Carolina Trust Code, when can a noncharitable irrevocable trust be terminated by consent without court involvement issues arising?
- Whenever a majority of beneficiaries agree
- If the settlor and all beneficiaries consent, even if termination conflicts with a material purpose (Correct answer)
- Only after the trustee dies
- Never; irrevocable means unmodifiable
Correct answer: If the settlor and all beneficiaries consent, even if termination conflicts with a material purpose
With the consent of the settlor and all beneficiaries, an irrevocable trust may be modified or terminated even if inconsistent with a material purpose of the trust.
Question 7: A trustee of a South Carolina trust sells trust land to her own husband at fair market value without disclosure. What is the likely result?
- The sale stands because the price was fair
- The sale is voidable as a conflict-of-interest transaction (Correct answer)
- The sale is valid if the husband acted in good faith
- The sale is automatically void and criminal
Correct answer: The sale is voidable as a conflict-of-interest transaction
Sales to a trustee's spouse are presumptively conflicted self-dealing under the duty of loyalty and are voidable by the beneficiaries regardless of fairness.
SC Bar Wills Trusts and Estates 3
Under the South Carolina Trust Code, is a trust presumed revocable or irrevocable when the instrument is silent?