Question 1

The elements of a trust include actual delivery by the grantor to the beneficiary with the intent of passing title.

Accepted Answer

The elements of a trust typically include the intent by the grantor to create a trust, the funding of the trust with property, the designation of a trustee and a beneficiary, and a lawful purpose. Actual delivery of property to the beneficiary is not a required element; instead, the property must be transferred to the trustee to hold for the benefit of the beneficiary.

Question 2

A living will is a will in the usual sense that it disposes of property.

Accepted Answer

A living will is a legal document that outlines a person's wishes regarding medical treatment in circumstances where they are no longer able to express informed consent, not a document that disposes of property.

Question 3

The costs of long-term improvements to the assets of a trust and the proceeds from a sale of the assets are allocated to the principal's beneficiary.

Accepted Answer

In a trust, long-term improvements and proceeds from the sale of assets are typically considered principal, which is allocated to the principal's beneficiary.

Question 4

A durable power of attorney authorizes an individual to act on behalf of another only if he or she is not incapacitated-which is why the power is called durable .

Accepted Answer

A durable power of attorney actually remains in effect if the person who granted it becomes incapacitated, which is precisely why it is called "durable." It is designed to allow the designated individual to act on the grantor's behalf even if the grantor is unable to make decisions due to physical or mental incapacity.

Question 5

If a trustee fails to comply with the terms of the trust or the governing statute, he or she is personally liable for any loss.

Accepted Answer

A trustee has a fiduciary duty to comply with the terms of the trust and governing statutes. Failure to do so can result in personal liability for any resulting loss to the trust.

Question 6

A party should always check the succession and inheritance laws of the state most likely to be involved in the resolution of a conflict related to the settling of an estate because
A)the Uniform Probate Code codified principles covering such disputes.
B)the requirements for a will and its probate are uniform among the states.
C)those laws vary widely among the states.
D)almost half of the states have enacted some part of the UPC.

Accepted Answer

Succession and inheritance laws can significantly differ from one state to another, affecting how an estate is settled.

Question 7

In an irrevocable living trust , legal title to the trust property passes to the beneficiary.

Accepted Answer

In an irrevocable living trust, legal title to the trust property passes to the trustee, not the beneficiary. The trustee manages the property according to the terms of the trust for the benefit of the beneficiary.

Question 8

Faye executes a will in which Gail is appointed to administer the will. After Faye dies, Gail lacks the capacity to serve, and a court appoints Hedy to handle the probate of Faye's estate. In this situation, the administrator is
A)Faye.
B)Gail.
C)Hedy.
D)the court.

Accepted Answer

Hedy becomes the administrator because she is appointed by the court to handle the probate of Faye's estate after Gail, the originally appointed executor, lacks the capacity to serve.

Question 9

With a resulting trust , assets held in the trust can pass to the heirs after going through probate.

Accepted Answer

In a resulting trust, assets are held by one party for the benefit of another and typically pass directly to the beneficiaries without going through probate.

Question 10

With a constructive trust, a court declares a property owner to be a trustee for parties who are, in fairness, entitled to the benefits that flow from the property.

Accepted Answer

A constructive trust is an equitable remedy imposed by a court to prevent unjust enrichment by declaring that the property is held by the wrongdoer as a trustee for the rightful beneficiary.

Question 11

On the death of the owner, property can be transferred through a will, a trust, or a state law prescribing its distribution. This indicates our laws require that, on death, title to property must be
A)dissociated from a decedent's estate.
B)disposed of by a trustee.
C)dissolved in favor of a beneficiary.
D)delivered in full somewhere.

Accepted Answer

The statement implies that upon the death of an owner, the law mandates that the property's title must be transferred or passed on, indicating it must be "delivered in full somewhere," whether through a will, a trust, or according to state law.

Question 12

A spendthrift trust provides for a beneficiary by giving him or her sufficient funds to maintain an extravagant lifestyle and still meet his or her obligations.

Accepted Answer

A spendthrift trust is designed to provide for a beneficiary by controlling the distribution of funds to protect the assets from being squandered or from creditors, not necessarily to maintain an extravagant lifestyle.

Question 13

A trust can be created to take effect during a person's lifetime but not after a person's death because the grantor must remain in control of the trust assets.

Accepted Answer

A trust can indeed be created to take effect during a person's lifetime (known as a living trust or inter vivos trust) and it can also be designed to continue after the person's death. The grantor does not need to remain in control of the trust assets; control can be handed over to a trustee.

Question 14

Health-care powers of attorney have grown in importance as medical technology has enabled physicians and hospitals to keep people alive for ever-increasing periods of time.

Accepted Answer

Health-care powers of attorney allow individuals to designate someone to make medical decisions on their behalf if they become unable to do so. As medical technology has advanced, enabling healthcare providers to extend life further, the need for clear directives regarding one's medical care preferences has become more critical, thus increasing the importance of health-care powers of attorney.

Question 15

A trust is a popular estate-planning option because at the grantor's death, assets held in a living trust revert to the decedent's estate.

Accepted Answer

Assets held in a living trust do not revert to the decedent's estate at the grantor's death; instead, they pass directly to the named beneficiaries without going through probate.

Question 16

Determining in advance how one's property and obligations should be transferred on death is the process of
A)risk management.
B)intestacy law.
C)debt maintenance.
D)estate planning.

Accepted Answer

Estate planning is the process through which an individual plans how their property and obligations will be managed and distributed upon their death.

Question 17

The trustee's duty of loyalty requires that he or she act in the exclusive interest of the grantor or settlor.

Accepted Answer

The trustee's duty of loyalty requires that he or she act in the exclusive interest of the beneficiaries, not the grantor or settlor.

Question 18

Because estate planning involves difficult decisions about the future, powers of attorney and living wills are often executed in conjunction with a will or trust.

Accepted Answer

Powers of attorney and living wills are legal documents that allow individuals to make decisions about their healthcare and financial affairs in advance, often executed as part of comprehensive estate planning to ensure that an individual's wishes are followed in the event they become incapacitated or unable to make decisions for themselves. This complements the purposes of wills and trusts, which manage the distribution of an individual's estate after death.

Question 19

A trust must be express because the essential elements of a trust include a writing.

Accepted Answer

A trust does not always require a writing to be valid; some trusts can be verbal, especially if the trust deals with personal property. The essential elements of a trust include intent by the settlor to create a trust, designation of a trustee, determination of trust beneficiaries, and transfer of property to the trust, but not necessarily a writing.

Question 20

If a will does not provide how an estate will be distributed to grandchildren, under the per capita method of distribution, an heir takes the share that his or her deceased parent would have been entitled to inherit.

Accepted Answer

Under the per capita method of distribution, each descendant at the same generational level shares equally in the estate, without regard to their deceased parent's share.

Quiz 48: Wills and Trusts