Chapters 11 and 12

Thanks to your help throughout the course, we've nailed down the substance of what we want to provide for our client. Now it's time to fill in the administrative stuff. Out client, Patty, wants her don, Don, to be the trustee. Which is most accurate? [[she must name a backup trustee]] [[she should name a backup trustee]] [[she can name a backup trustee]] [[she cannot name a backup trustee]]

Not necessarily [[try again|open]]

Correct! [[continue|11-1]]

There's a better answer [[try again|open]]

Incorrect [[try again|open]]

Correct. Let's assume for a second that she does not name one. Let's say Don is unable to serve, who will be the new trustee? [[Don decides]] [[Patty decides]] [[the beneficiaries decide]] [[a court decides]] [[the trust fails and the money is distributed]]

Nope. The trustee can be given that power, but does not inherently have it if the trust does not grant it. [[try again|11-1]]

The grantor does not typically retain power in a trust except to the extent specifically stated by the trust. [[try again|11-1]]

The beneficiaries don't inherently have authority over a trustee. [[try again|11-1]]

Correct! There's really nobody else that could name a trustee. Now you see why it's a good idea to name a backup trustee! [[continue|11-2]]

That is incorrect. [[try again|11-1]]

Assume that the trust doesn't say anything about Don's powers as trustee. Which of the following powers will Don likely NOT have? [[power to amend the trust]] [[power to distribute trust assets]] [[power to invest trust assets]] [[power to sue on behalf of the trust]]

Correct! This is a power that a trustee rarely has. [[continue|11-3]]

Sorry; that is a standard power of a trustee. [[try again|11-2]]

Can Don also be a beneficiary of the trust? [[No; he's a trustee]] [[Yes]] [[Yes, as long as there's at least one other beneficiary]]

sorry, that is incorrect [[try again|11-3]]

There's a better answer. [[try again|11-3]]

Correct! If there's no other beneficiary, then the legal and equitable interests merge and the trust is extinguished. [[continue|11-4]]

Don is worried about his potential liability. What should we tell him? [[He's not subject to liability at trustee]] [[He's only subject to liability if he is grossly negligent]] [[He does owe a fiduciary duty to the trust beneficiaries]] [[He has to make money for the trust or he can be sued]]

sorry, that is incorrect [[try again|11-4]]

Correct! [[continue|11-5]]

sorry, that is incorrect [[try again|11-4]]

Can Don get paid to be trustee? [[No]] [[Yes, only of the trust says so]] [[Yes, even if the trust does not say so]]

sorry, that is incorrect [[try again|11-5]]

Correct! Default trustee compensation is generally set by statute. [[continue|11-6]]

Okay, now let's turn to charitable trusts. Which of the following is true of a charitable trust? [[It must benefit a single charitable beneficiary]] [[It must benefit only charitable beneficiaries in general]] [[It must benefit at least one charitable beneficiary and can generate another non-charitable beneficiary]] [[It can benefit non-charitable beneficiaries as long as it has a charitable purpose.]]

Sorry, that is incorrect. A charitable trust cannot benefit a single person. [[try again|11-6]]

Correct! [[continue|12-1]]

Incorrect. A charitable trust cannot benefit a non-charitable beneficiary. [[try again|11-6]]

Incorrect. [[try again|11-6]]

Which of the following would NOT be considered a charitable purpose? [[advocating the election of a politcal candidate]] [[promoting research to find a cure for a disease]] [[advancing a particular religion]] [[relieving poverty]]

Correct! An organization supporting a candidate can be tax exempt under a different rule, but it is not charitable. [[continue|12-2]]

nope; that is a charitable purpose [[try again|12-1]]

Let's say that the charitable trust is set up to cure athelete's foot. Assume that in 10 years, that goal is completely accomplished but there's still $100,000 left in the trust. Which is most likely to happen to that money? [[It's distributed back to the grantor]] [[It's distributed to the Grantor's heirs]] [[It goes to the state]] [[It's used for a randome charitable purpose decided by the court]] [[It's used for a purpose similar to treating athelete's foot, as decided by the court]]

No, this would make it a non-charitable trust. [[try again|12-2]]

No reason why that should happen. [[try again|12-2]]

Sorry, there's a better answer. [[try again|12-2]]

Correct! This is the "cy pres" rule. [[continue|12-3]]

A split interest charitable trust is... [[not a charitable trust]] [[a valid charitable trust]] [[it depends]]

Nope. [[it depends]]

What does it depend on? [[All the beneficiaries must be charitable, but the timing of the interests can be split.]] [[The trust must always be charitable, but there can be some non-charitable beneficiaries.]]

Yes! [[continue|12-4]]

Nope. [[try again|it depends]]

Our charitable trust allots $10,000 per year to charity for 20 years and then everything reverts back to the grantor or her heirs. This is... [[not a valid charitable trust]] [[a charitable lead annuity trust]] [[a charitable lead unitrust]] [[a charitable remainder annuity trust]] [[a charitable remainder unitrist]]

It is. [[try again|12-4]]

Correct! [[continue|12-5]]

Incorrect. A unitrust is funded by a percentage of what's in the trust, not a fixed amount. [[try again|12-4]]

Incorrect. A charitable remainder trust's charitable interest is at the end of the trust's existence. [[try again|12-4]]

Incorrect. A unitrust is funded by a percentage of what's in the trust, not a fixed amount. Also, a charitable remainder trust's charitable interest is at the end of the trust's existence. [[try again|12-4]]

Congratulations! You have completed this exercise! The code word for weekly interaction credit is: idyllic