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1BaR_2-16_Ql-3) February 2016 California Bar Exam

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Dot's Interest
Revocation of trust
A Inter vivos trust can be revoked by its own terms when the settlor reserves the
right to revoke,
Here, W expressly reserved the right to revoke the first trust, by explicitly stating
that she has the power to revoke or amend the trust at any time. D will argue that
the trust was not properly revoked because under the terms of the trust, "W had
the power to revoke or amend the trust in writing only, by a document signed by
W and deliver to W and Dot as co-trustees," Given that D was surprised to find
W's will, it is dear that W never gave her a signed document stating her intent to
revoke the trust, as required by the instructions in tie trust As a result, the trust
was not properly revoked,
Revocation by subsequent instrument
A testimentary instrument can be revoked by execution of a second testirnentary
instrument
Here, W executed a subsequent will, clearly stating her intent to "revoke the trust
I previously established." P will argue the will did not revoke the first trust
because the trust could only be revoked by a signed writing by W, S will argue
that the language of the wifl indicates W express intento to revoke the trust, and
the fact that it was drafted years after the trust indicates that the wilt is a more
recent expression of W's testimentary intent. For .those reasons, the court will
likely find that the trust was revoked by the will.
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ID| iAR_2~16_Ql-3) February 2016 California Bar Exam
Failure of trust
A trust must have property and a trustee for the trust to be valid.
Absence of trustee
If there is no trustee, the court will appoint one.
Here, D refuses to serve as trustee and claims that the trust fails as a result, but
even if she resigns as trustee, the trust would not fail because the court will
appoint a trustee in her absence.
Trust Property
The first trust no longer has property It in because W's will took the ranch out of
the original trust and placed ft another trust Since the ranch was the only
property in the original trust, the trust fails, Furthermore, D does not have interest
in the ranch because it is it held in the new trust.
In sum, D has no interest in the house or ranch.
Bob's interest
Pour-over will
A pour-over will pours all testimentary property of the settlor into a trust upon the
settlor's death.
Here, W created a pour over will in which her house and ranch were to be placed
in trust for the benefit of B, with S as trustee. Thus, B holds an Interest in the
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ID bHAR_2-16_Ql-3} February 20IS California Bar Exam
house and ranch as the benelficlary of the trust for five years. It it not clear
whether this means that B has possessionary rights to the house and ranch or
whether the properties are investments.
Shifting executory interest
A present possessory estate that is subject to divestment by a third party is a
shifting executory interest
Here, B has present possessionary interest In the ranch and house, but after five
years, the property belongs to S in fee simple absolute.
S's interest
S is the trustee of the trust for the benefit of B, and holds Indevisable fee simple
interest in house and ranch.
2. S's breach of duties
Duty to earmark
Trustee owes a duty to earmark trust property from the trustee's personal
property.
Here, S sold the house to himself in his individual capacity, instead in his
capacity as trustee, thereby failing to earmark the trust property.
Duty to separate trust property
Trustee owes a duty to separate trust property from personal property and to
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avoid coorningling of assets.
Here, S placed all of the proceeds from the sale of the house directly into his
new business, thereby comrmngly his assets from his business with the
proceeds from the house sale, which is property of the trust.
Duty to invest
Trustee owes a duty to invest the trust property so that generates income. He is
held to the standard of care as someone handling their own investments.
Here, S breached the standard of care by placing all of the proceeds from the
sale of the house into his new business, A reasonable person handling their own
financial assets would not risk half of their assets in a new business. Instead, a
reasonable person would invest in business with a welt-devloped track- record of
success. Thus, S breached his duty by investing in a new business.
Furthermore, S has not done anything to the ranch. It is unclear whether the
ranch smart real estate investment that generates income or if its value is
increasing over the years. Nevertheless, S should sell the property and invest in
different securities or use the ranch to generate income, such as renting it out.
Duty to diversity
A trustee must diversify investments to protect the trust
Here, S placed all of the proceeds from the house sale into the
Duty of Loyalty
A trustee owes a duty of loyalty to beneficiaries, meaning that he must put the
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BAE__2-16_Ql-3) February 2016 California Bar Exam
interests of the beneficiary before his own Interests and avoid conflicts of
interest. This duty is breached when the trustee engages in "self-dealing," in
which he conducts personal transactions with the trust to his own benefit.
Here, S breached his duty of byatty to B by self-dealing: selling the house and
placing all of the assets, which are trust property, into Sam's Solar. In doing so,
S placed his interests in his new business above B's interests as beneficiary of
the trust, snd creating a conflict of interest between himself/his business and the
trust For those reasons, S breached his duty of loyalty to B.
Remedies
Removal of S as trustee
The court will remove a trustee if the trustee breaches his fiduciary duties.
Here, B can petition the court to remove S as trustee for breach of his duty of
loyalty, care, and many others.
Constructive Trust
This is an equitible remedy in which the court places property in a trust and
orders the person in possession to transfer the property to the beneficiary.
Here, the court will impose a constructive trust on the ranch and order that S
transfer it to B. The court could order a trust on the Sam's Solar if all of its
assets are comprised of trust property. However, because S is likely to have
invested some of his own money in the business, this might not be the best
remedy.
Equitible lien
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iLB&R_2-16_Ql-3} February 2016 California Bar Exam
This is a restitutionary equitible remedy upon which the court traces ill-gotten
proceeds to defendant's property, then places a lien on that property and forces
a safe.
Here, the proceeds from the sale of the house can be directly traced to Sam's
Solar, so the court can place a fien on S's business and order a forced sale.
Because it Is a new business, it is likely that B will not receive all of the money,
so B will be given a deficiency judgment, which can be placed on S's other
property.
Question #1 Final Word Count =1185
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