Express Trusts: Formation - Requirements; Trustee

Question 1

What is an express private trust?

Answer 1

An express trust is a trust created “in express terms, and usually in writing” as distinguished from one inferred by the law from the conduct or dealings of the parties

Question 2

What are the elements of a valid private trust?

Answer 2

1. Intent to create trust (manifested by settlor’s words, writing, or conduct)
2. Trustee - (note: lack will only cause inter-vivos trust to fail, not testamentary)
3. Trust property (res)
4. Definite beneficiary
5. Valid trust purposes (one that is not illegal, tortious, or against public policy and does not violate RAP)

Question 3

What is the rule w regards to settlor’s intention to create trust?

How may intent be manifested?

When is intent required?

What is the requirement of immediacy?

Answer 3

Settlor’s INTENTION to create trust is essential to existence of express trust

May be manifested by:
- written or spoken words (declaring oneself trustee) or conduct (delivery) of settlor
NOTE –> delivery means placing trust property outside settlor’s control (unless settlor serves as trustee)

When Intent is required —> at the time settlor OWNS trust property, and prior to conveying it to another
HOWEVER –> later conduct may be evidence of intent

Requirement of immediacy —> settlor must INTENT that trust take effect immediately, NOT at some future time
HOWEVER –> a future interest CAN be trust property

Question 4

Is oral trust of personal property valid?

What is required for trusts of land (SOF) ?

Answer 4

YES

Trust of land normally must be in writing to satisfy SOF.
HOWEVER –> otherwise invalid oral trust of land may be enforced via “constructive trust”

Question 5

Is communication of intent to beneficiaries necessary?

Answer 5

NO.

Delivery of deed to trustee is sufficient

EXCEPTION –>
if settlor is also trustee, he must segregate trust assets or otherwise show intent

Question 6

What issue arises with regards to Settlor’s intent and precatory expressions?

Answer 6

“precatory language” = expression of hope, wish, mere suggestion that property be used in a certain way

General rule –> precatory language DOES NOT create trust

HOWEVER –> this inference can be overcome by:
1. definite and precise directions;

2. directions addressed to fiduciary (ie..executor under will)
3. a resulting “unnatural disposition: of property
   (Example –> close relative gets nothing if trust fails)
4. Extrinsic evidence showing that Settlor PREVIOUSLY SUPPORTED intended beneficiary

Question 7

What is the general rule w regards to requirement of a trustee?

For inter-vivos trust?

For testamentary trust?

Answer 7

Inter-vivos trust –> may fail if there is a lack of trustee for lack of delivery

Testamentary trust –> won’t fail due to lack of trustee, court will appoint UNLESS it is clear settlor wanted trust to fail if trustee was not available

Question 8

Once established, will a trust fail due to death of trustee, refusal by trustee to accept appointment, or resignation of trustee?

Answer 8

Generally, no.

Court will appoint another trustee unless it is clear that Settlor wanted it to fail if not for this specific trustee

Question 9

What is the rule w regards to trustee having duties?

Answer 9

In general –> trustee must have duties.

Effect –> A “passive” trust will fail, and beneficiaries will take legal title

NOTE –> in most jdxns, the duty to convey title is sufficient

Question 10

What are the qualifications of a trustee?

Answer 10

Must have:

1. capacity to hold property; and
2. capacity to administer trust

NOTE –> minors and insane people can hold property, but can’t administer

Question 11

May a court remove a trustee, or refuse to confirm an appointment?

Answer 11

Yes.

Basic consideration –> will continuance in office be determinate for trust?

Grounds for removal:

1. serious breach of trust
2. old age
3. habitual drunkenness,
4. conflict of interest

NOTE –> if settlor knew of grounds for removal when making trust, court may choose not to remove

Question 12

May beneficiaries remove a trustee?

Answer 12

Absent grounds, beneficiaries CANNOT remove trustee unless that power is expressly granted in the instrument

Question 13

May a trustee disclaim or refuse appointment?

Answer 13

Yes.

Before acceptance, a trustee can disclaim or refuse appointment for any reason

HOWEVER –> they cannot accept in part, and disclaim in part

Question 14

May a trustee resign?

Answer 14

Once an appointment is accepted, a trustee can ONLY resign with court’s permission UNLESS:

1. all beneficiaries consent; OR
2. trust provides otherwise

Question 15

With regards to appointment of trustee, what is the rule re: relating back and testamentary trusts?

Answer 15

A testamentary trust is treated as in existence as of Settlor’s death, and trustee’s acceptance “relates back” to that date:

Thus –> Trustee can become liable in a fiduciary capacity for torts arising prior to his acceptance

Question 16

What happens if trustee is also sole beneficiary?

Answer 16

titles merge and trust terminates

Question 17

What is required w regards to testamentary trusts and formalities?

Answer 17

Trust INTENT and essential terms (trust res, beneficiaries, and purpose) –> must be ascertained from:

1. WILL itself;
2. writing incorporated by reference into the will;
3. from exercise of power of appointment contained in will