VA Bar Wills Trusts and Estates 3 — Questions and Answers
Question 1: Under Virginia law, which element is NOT required for a valid express trust?
- A trustee capable of holding title
- Ascertainable beneficiaries
- Trust property (res)
- A written trust instrument (Correct answer)
Correct answer: A written trust instrument
Virginia does not require all trusts to be in writing; oral trusts of personal property may be enforceable, though writing is advisable for real property.
Question 2: Under Virginia's Uniform Trust Code, the trustee's duty of loyalty requires the trustee to:
- Maximize investment returns regardless of risk
- Act solely in the interests of the beneficiaries (Correct answer)
- Distribute assets equally among all beneficiaries
- Follow the settlor's original intent even if circumstances change drastically
Correct answer: Act solely in the interests of the beneficiaries
Va. Code § 64.2-763 codifies the duty of loyalty, requiring trustees to administer the trust solely in the beneficiaries' interests.
Question 3: Under Virginia law, a valid spendthrift provision in a trust:
- Prevents creditors from reaching a beneficiary's interest before distribution (Correct answer)
- Protects only against tort creditor claims
- Can be waived by the beneficiary assigning their interest
- Only applies to irrevocable trusts with court approval
Correct answer: Prevents creditors from reaching a beneficiary's interest before distribution
Va. Code § 64.2-743 recognizes spendthrift provisions that restrain both voluntary and involuntary transfers of a beneficiary's interest before distribution.
Question 4: Under Virginia's prudent investor rule, a trustee investing trust assets must:
- Evaluate each investment in isolation to avoid loss
- Consider the portfolio as a whole and diversify (Correct answer)
- Prioritize capital preservation above all other objectives
- Select only from a statutory 'legal list' of approved investments
Correct answer: Consider the portfolio as a whole and diversify
Virginia's prudent investor standard (Va. Code § 64.2-780) requires trustees to consider the total portfolio and diversify unless special circumstances justify otherwise.
Question 5: Which of the following creditors CAN reach a beneficiary's interest in a spendthrift trust in Virginia?
- A general unsecured creditor owed a business debt
- A beneficiary's ex-spouse seeking court-ordered child support (Correct answer)
- A credit card company with a judgment lien
- A hospital seeking payment for elective services
Correct answer: A beneficiary's ex-spouse seeking court-ordered child support
Va. Code § 64.2-743(D) provides exceptions to spendthrift protection for claims for child support, spousal support, and certain government claims.
Question 6: A trustee in Virginia breaches the duty of loyalty by:
- Hiring the trustee's own law firm to provide legal services to the trust without consent (Correct answer)
- Delegating investment management to a licensed professional advisor
- Investing in diversified low-cost index funds
- Providing annual accountings to all current beneficiaries
Correct answer: Hiring the trustee's own law firm to provide legal services to the trust without consent
Self-dealing — such as engaging the trustee's own firm — constitutes a conflict of interest that violates the duty of loyalty under Va. Code § 64.2-763.
Question 7: Under Virginia's Uniform Trust Code, a noncharitable irrevocable trust may be modified or terminated by:
- Court order only, regardless of the parties' wishes
- The settlor acting alone after trust creation
- Consent of the settlor and all beneficiaries if the modification is not inconsistent with a material purpose (Correct answer)
- A majority vote of beneficiaries without court involvement
Correct answer: Consent of the settlor and all beneficiaries if the modification is not inconsistent with a material purpose
Va. Code § 64.2-729 allows modification or termination with consent of the settlor and all beneficiaries if doing so does not frustrate a material purpose of the trust.
VA Bar Wills Trusts and Estates 3
Under Virginia law, which element is NOT required for a valid express trust?