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Trusts: Termination and Modification

Description: This quiz is designed to assess your understanding of the legal principles and procedures related to the termination and modification of trusts.
Number of Questions: 15
Created by:
Tags: trusts termination modification revocation amendment
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Which of the following is NOT a method for terminating a trust?

  1. Revocation

  2. Expiration of the trust term

  3. Occurrence of a specified event

  4. Mutual agreement of the settlor and the trustee


Correct Option: D
Explanation:

While the settlor and the trustee can agree to terminate a trust, this is not a method of termination recognized by law. The other options are all valid methods for terminating a trust.

In general, who has the power to revoke a trust?

  1. The settlor

  2. The trustee

  3. The beneficiaries

  4. The court


Correct Option: A
Explanation:

The settlor, or the person who creates the trust, typically has the power to revoke the trust. However, there are some exceptions to this rule, such as when the trust is irrevocable or when the settlor has given up the power to revoke.

What is the effect of revoking a trust?

  1. The trust is terminated and the assets are distributed to the beneficiaries

  2. The trust continues, but the settlor regains control of the assets

  3. The trust continues, but the trustee is replaced

  4. The trust continues, but the terms of the trust are modified


Correct Option: A
Explanation:

Revoking a trust typically results in the termination of the trust and the distribution of the assets to the beneficiaries. However, there may be some exceptions to this rule, depending on the terms of the trust and the applicable law.

When does a trust typically terminate by expiration of the trust term?

  1. At the death of the settlor

  2. At the death of the trustee

  3. At the death of the last beneficiary

  4. At the end of a specified period of time


Correct Option: D
Explanation:

A trust typically terminates by expiration of the trust term when the specified period of time for which the trust was created has elapsed. This is often referred to as a "term trust".

What is the effect of a trust terminating by expiration of the trust term?

  1. The trust is terminated and the assets are distributed to the beneficiaries

  2. The trust continues, but the settlor regains control of the assets

  3. The trust continues, but the trustee is replaced

  4. The trust continues, but the terms of the trust are modified


Correct Option: A
Explanation:

When a trust terminates by expiration of the trust term, the trust is typically terminated and the assets are distributed to the beneficiaries. However, there may be some exceptions to this rule, depending on the terms of the trust and the applicable law.

What is the effect of a trust terminating by occurrence of a specified event?

  1. The trust is terminated and the assets are distributed to the beneficiaries

  2. The trust continues, but the settlor regains control of the assets

  3. The trust continues, but the trustee is replaced

  4. The trust continues, but the terms of the trust are modified


Correct Option: A
Explanation:

When a trust terminates by occurrence of a specified event, the trust is typically terminated and the assets are distributed to the beneficiaries. However, there may be some exceptions to this rule, depending on the terms of the trust and the applicable law.

What is the difference between a trust modification and a trust amendment?

  1. A modification changes the terms of the trust, while an amendment adds new terms to the trust

  2. A modification changes the trustee, while an amendment changes the beneficiaries

  3. A modification is made by the settlor, while an amendment is made by the trustee

  4. A modification is made by the court, while an amendment is made by the settlor


Correct Option: A
Explanation:

A trust modification changes the terms of the trust, while a trust amendment adds new terms to the trust. Both modifications and amendments can be made by the settlor, the trustee, or the court, depending on the circumstances.

Who typically has the power to modify a trust?

  1. The settlor

  2. The trustee

  3. The beneficiaries

  4. The court


Correct Option: A
Explanation:

The settlor, or the person who creates the trust, typically has the power to modify the trust. However, there are some exceptions to this rule, such as when the trust is irrevocable or when the settlor has given up the power to modify.

What is the effect of modifying a trust?

  1. The terms of the trust are changed

  2. The trustee is replaced

  3. The beneficiaries are changed

  4. The trust is terminated


Correct Option: A
Explanation:

Modifying a trust typically results in a change to the terms of the trust. However, there may be some exceptions to this rule, depending on the terms of the trust and the applicable law.

Who typically has the power to amend a trust?

  1. The settlor

  2. The trustee

  3. The beneficiaries

  4. The court


Correct Option: A
Explanation:

The settlor, or the person who creates the trust, typically has the power to amend the trust. However, there are some exceptions to this rule, such as when the trust is irrevocable or when the settlor has given up the power to amend.

What is the effect of amending a trust?

  1. New terms are added to the trust

  2. The terms of the trust are changed

  3. The trustee is replaced

  4. The beneficiaries are changed


Correct Option: A
Explanation:

Amending a trust typically results in the addition of new terms to the trust. However, there may be some exceptions to this rule, depending on the terms of the trust and the applicable law.

Can a trust be terminated before the expiration of the trust term?

  1. Yes, with the consent of all the beneficiaries

  2. Yes, with the consent of the settlor and the trustee

  3. Yes, by order of the court

  4. All of the above


Correct Option: D
Explanation:

A trust can be terminated before the expiration of the trust term with the consent of all the beneficiaries, with the consent of the settlor and the trustee, or by order of the court.

What is the doctrine of cy pres?

  1. A doctrine that allows a court to modify a trust to achieve the settlor's intent

  2. A doctrine that allows a court to terminate a trust before the expiration of the trust term

  3. A doctrine that allows a settlor to revoke a trust

  4. A doctrine that allows a trustee to resign


Correct Option: A
Explanation:

The doctrine of cy pres is a doctrine that allows a court to modify a trust to achieve the settlor's intent when the original purpose of the trust becomes impossible or impracticable to achieve.

What is the rule against perpetuities?

  1. A rule that limits the duration of a trust

  2. A rule that limits the number of beneficiaries of a trust

  3. A rule that limits the amount of property that can be held in a trust

  4. A rule that limits the powers of a trustee


Correct Option: A
Explanation:

The rule against perpetuities is a rule that limits the duration of a trust to a period of time that is not longer than the lifetime of the settlor plus twenty-one years.

What is the purpose of the rule against perpetuities?

  1. To prevent trusts from becoming perpetual

  2. To prevent trusts from accumulating too much wealth

  3. To prevent trusts from being used for illegal purposes

  4. To prevent trusts from being used to avoid taxes


Correct Option: A
Explanation:

The purpose of the rule against perpetuities is to prevent trusts from becoming perpetual, which would allow them to accumulate wealth and power indefinitely.

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