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