ACCY 411--Final Exam Estates, Trusts, & Exempt Organizations (13/45)

Examples of ordinary expenses (expense allocation):

1. Insuring 2. Interest on loans/mortgages 3. Income taxes 4. Real estate taxes 5. Repairing and preserving 6. Depreciation allowance

What are the adjustments to the trust's principal?

1. Investment costs and commissions 2. Income taxes on gains added to the principal 3. Costs of preparing property for rent or sale 4. Extraordinary repairs (improvements)

Examples of ordinary receipts (income allocation):

1. Net rents 2. Net income 3. Cash dividends 4. Rights 5. Distributions 6. Interest on notes/bonds 7. Royalties

What are types of income allocations?

1. Ordinary 2. Extraordinary

What are the adjustments of the trust's income?

1. Rent expense 2. Lease cancellation fees 3. Interest expense 4. Insurance expense 5. Income taxes on trust income 6. Property taxes

What are the types of implied trusts?

1. Resulting trust 2. Constructive trust

What are the elements of a trust?

1. Settlor 2. Trustee 3. Trust Property 4. Beneficiary

Examples of extraordinary receipts (income allocation):

1. Stock dividends 2. Stock splits 3. Proceeds from sale/exchange of trust assets 4. Sum from settlement claims 5. Income earned prior to formation

What is the order of distribution in an intestate?

1. Surviving spouse 2. Descendants 3. Ascendants 4. Collaterals

How are trusts created?

1. By will (testamentary trust) 2. During life (inter vivos trust)

Examples of extraordinary expenses (expense allocation):

1. Capital improvements 2. Losses 3. Mortgage/loan principal payments 4. Costs incurred in the purchase/sale 5. Real estate taxes on improvements

When the trust res (trust property) is real property, the trust must be evidenced by...

A writing to satisfy the statue of frauds

Created for the purpose of benefitting the public at large or some particular class of the public indefinite in number

Charitable Trust

Trust that is intentioned to confer a benefit on the public at large or on a large segment of the public

Charitable Trust

Such as brothers and sisters

Collaterals

The estate or trust is said to be a ________.

Conduit

A remedy in the form of a trust created by operation of law to prevent unjust enrichment

Constructive Trust

The process of determining the distribution of the estate when the total available assets in the estate are insufficient to satisfy the provisions of the will

Abatement

Imposes affirmation duties of management and administration on the trustees

Active Trust

Extraordinary receipts are treated as ________.

Additions to principals

Occurs when a specific bequest or devise becomes impossible to perform due to circumstances or events occurring after the execution of the will

Ademption

Includes the entire process of assembling the assets of the estate, paying off claims against the estate (including taxes), and distribution the assets of the estate according to the testator's intentions or the law of intestate succession

Administration

A person who is appointed by the court to administer the estate of an individual who died intestate

Administrator

Generally created in a testamentary instrument (usually a will) and comes into existence only upon the settlor's death

Testamentary Trust

A will is ________; that is, during the testator's lifetime, the testator has the power to alter, amend, or revoke the will

Ambulatory

Parents and grandparents

Ascendants

The act of witnessing the signing of a document and then also signing it to verify that is was properly signed by those bound by its contents

Attestation

An individual who dies with a valid will in existence is said to die ________.

Testate

The person who makes a will and whose intentions are reflected in the will

Testator

The person for whose benefit the trust property is held by the trustee

Beneficiary

Nuncupative will is commonly called a ________.

Deathbed will

Children and grandchildren

Descendants

A gift of real property under a will

Devise

Person who is appointed by the tester to carry out the testator's direction concerning the disposition of property under her/his will

Executor

Created by the settlor's expression of her/his intone to establish a division of legal and equitable title in property

Express Trust

A gift of an unspecified piece of realty

General Devise

A gift of personal property payable out of the general assets of the estate

General Legacy

Handwritten; testator signed, document and is an alternative to a will produced by a lawyer

Holographic Will

The intention to create the trust is inferred or presumed by law

Implied Trust

Ordinary receipts are treated as ________.

Income

In order to create a trust, the settlor must indicate his/her present ________ to establish the separation of legal and equitable title.

Intention (intent)

Created by the settlor while she/he is living and comes into existence during his/her lifetime

Inter Vivos Trust

A spendthrift trust may be either ________ or ________.

Inter vivos; testamentary

An individual is said to die ________ if the person dies without having a valid will in existence.

Intestate

A gift of personal property under a will

Legacy

A recipient of all or part of a deceased person's estate; beneficiary or heir to the terms of a will

Legatee

A verbal will that must have two witness and can only deal with the distribution of personal property

Nuncupative Will

Imposes NO real duties on the trustees; they are mere holders of the legal title to the trust property until ownership passes to the beneficiaries

Passive Trust

The manner of distribution of property in which the heirs to an intestate's estate share and share alike

Per Capita

The manner of distribution of property in which a class or group of distributes take the share that their deceased would have been entitled to

Per Stirpes

All other other trusts are ________.

Private Trusts

The process of proving the validity of a will by demonstrating that an instrument purporting to be a will was executed in accordance with legal requirements

Probate

Has jurisdiction to determine and approve the validity of a will and to supervise the administration of the estate

Probate Court

Created by a transfer of the legal title to real estate to a trustee

Real Estate Investment Trust (REIT)

Real Estate Investment Trust (REIT) is authorized by the provisions of the ________.

Real Estate Investment Trust Act of 1960

What remains after all other gifts have been distributed

Residuary Estate

Arises due to the presumed intention of a settlor to create a trust when the intent to do otherwise is NOT adequately expressed

Resulting Trust

Person who causes the trust to come into existence

Settlor

A gift of particular piece of real estate

Specific Devise

A gift of specified item or personalty

Specific Legacy

Created to protect the beneficiary from creditors or from her/his squandering of the trust's assets

Spendthrift Trust

Prohibits any transfer of a beneficiary's right by assignment or otherwise

Spendthrift Trust

Created when the settlor opens a bank account in her/his own name "as trustee" for another

Tentative or Totten Trust

A will is ________; that is, it becomes effective only upon the death of the testator.

Testamentary Instrument

A fiduciary relationship with respect to property in which one person holds legal title to the property for the benefit of another

Trust

Property interest that the trustee holds for the benefit of the beneficiaries

Trust Property/Trust Res

Holds the legal title to the trust property for the benefit of the beneficiaries

Trustee

The person who funds the trust

Trustor, settlor, or grantor

How are estates created?

When an individual dies

When the instrument is silent, the trustee's decision generally are governed by the ________.

Uniform Act

Example of a testamentary trust...

Will

Legal declaration of an individual's intentions and desire with respect to the distribution of property after her/his death

Will