We're looking at trust administration. Okay, what factor is NOT a legitimate factor to take into account in setting up the trust administration or an irreovcable trust? [[serving the long term purposes of the trust]] [[assessing the risk tolerance of the client]] [[allowing the grantor to take out trust assets at will]] [[determining the level of trust the grantor places in the trustee]] Incorrect. That is a legitimate thing to worry about when setting up trust administration provisions. [[try again|Start]]Incorrect. That is a legitimate thing to worry about when setting up trust administration provisions. [[try again|Start]]Correct. Allowing he grantor to take out trust assets at will would defeat the purpose of an irrevocable trust. [[continue|Start2]]Incorrect. That is a legitimate thing to worry about when setting up trust administration provisions. [[try again|Start]]Should we allow distributions to the grantor from the irrevocable trust we're setting up? [[yes]] [[no]] [[it depends]] Not always a good idea. [[continue|it depends]]Sometimes it is a good idea. [[continue|it depends]]It depends. What does it depend on? [[whether the grantor is worried about estate tax|correct]] [[whether the grantor is worried about creditors|correct]] [[whether the grantor is worried about Medicaid eligibility|correct]] All 3 answers are correct as all 3 things can be impacted by the grantor's right to distributions. Fine. What about distributions of trust income to beneficiaries. Should we make them mandatory or discretionary? [[mandatory]] [[discretionary]]That's one possibility. Mandatory distributions have what advantage? [[simplifies income taxes]] [[prevents the beneficiaries' creditors from accessing the funds]] [[give the trust more flexbility]]What is the advantage of discretionary distributions as opposed to mandatory ones? [[They make it less likely to be included in the grantor's taxable estate]] [[They help protect the assets from the creditors of the beneficiaries.]] [[They help simplify trust income tax returns]]Yes! This makes the income taxable to the beneficiaries. It's a "simple" trust. [[continue|start3]]No! If it's mandatory, the creditors do have access to it. Sounds like you might want a [[discretionary]] distribution plan.No! this provision gives the trust less flexibility. Sounds like you might want a [[discretionary]] distribution plan.Okay, let's move on to Powers of Appointment. Which is the most dangerous to many trust purposes? [[no power of appointment]] [[special power of appointment]] [[general power of appointment]]I don't see why that would matter in this regard. [[try again|discretionary]]Yes! Making the distributions to the beneficiaries mandatory would increase the access to those funds by the creditors. [[continue|start3]]If anything, they make trust income tax returns more complex. [[try again|discretionary]]Why is that dangerous? [[try again|start3]]That is not so dangerous. [[try again|start3]]Yes! [[continue|start4]]What is so dangerous about a general power of appointment? [[the assets wouild be in the taxable estate of the POA holder]] [[the assets would be vulnerable to the creditors of the POA holder]] [[the assets would be considered available resources to the POA holder for Medicaid estate recovery purposes]] [[all of these]]There's a better answer. [[try again|start4]]There's a better answer. [[try again|start4]]There's a better answer. [[try again|start4]]Yes! A general POA is very dangerous for many reasons. [[continue|start5]]When can a trust terminate? [[when established by the trust instrument]] [[when the trustee wants to terminate it]] [[A trust never has to terminate]]Correct! Except that there's a limitation on how long a trust can last called the... [[rule against perpetuities]] [[rule of the protection of future interests]]You don't want to give the trustee that much power. [[try again|start5]]Yes it does, under the [[rule against perpetuities]]Yes. The rule against perpetuities generally limits a trust's length to 21 years after the death of the last trust beneficiary alive at the time the trust is created. [[continue|start6]]I just made up that phrase It's actually the [[rule against perpetuities]]Our client has minor children and is worries about the trust monsey being distributed to them. [[Then don't make a trust for their benefit.]] [[Set up a family trust on termination]] [[Set up individual single beneficiary trusts for each minor beneficiary]]You're just being silly, aren't you? [[try again|start6]]Sounds good. It trust money is given to one minor beneficiary... [[it counts against that beneficiary's ultimate share]] [[it counts against the trust as a whole]] [[it depends on what the trust says]]Not a bad idea. When should the trust end? [[when the beneficiary turns 21]] [[when the beneficiary turns 30]] [[never]] [[it depends on what the trust says in this regard]]There's a better answer. [[try again|Set up a family trust on termination]]There's a better answer. [[try again|Set up a family trust on termination]]Yes. Trust can make these sorts of decisions for themselves in any reasonable manner set forth by the trust instrument. [[continue|end]]Congratulations! You made it through the exercise for chapter 2. THE END code word for interaction credit: whimsicalThere's a better answer. [[try again|Set up individual single beneficiary trusts for each minor beneficiary]]There's a better answer. [[try again|Set up individual single beneficiary trusts for each minor beneficiary]]There's a better answer. [[try again|Set up individual single beneficiary trusts for each minor beneficiary]]Yes. Trust can make these sorts of decisions for themselves in any reasonable manner set forth by the trust instrument. [[continue|end]]