fiduciary administration Flashcards
(17 cards)
Mandatory trust
- The trustee must make specified distributions, specified as to the:
1) the amount and
2) the beneficiary
Ex. pay 500 to A,
- Pay income to B for the rest of life, remainder to C
Discretionary trust
Trustee has discretion over when, to whom, or in what amounts to make the distribution
(flexibility with beneficiary and or the amount of distribution)
spray trust
type of discretionary
Trustee has discretion to decide who, within a group, to give money to and in what amounts.
ex. “to A’s spouse and descendents”. Can decide how much each person gets.
sprinkle trust
Discretionary trusts authorize trustee to accumulate income/add to principal.
support trust
the trustee’s discretion over distributions is subject to a standard,
such as “to provide for beneficiary’s health, education, maintenance, and support.” (HELMS)
Marsman case as to discretionary trusts and accounting
In a discretionary support trust, the trustee must inquire into the needs of the beneficiary to execute the trust with sound fiduciary judgment.
simply saying the accountings is not sufficent
exculpatory clause
protects a trustee from liability for out-of-pocket damages (not against injunction) for breach of trust unless higher threshold of fiduciary misconduct prescribed by clause is met
exculpatory clause (MA)
Exculpation is generally invalid unless trustee proves it is fair under the circumstances and adequately explains it to settlor.
often needs to be accompayined by a written document
default rules that prioritize wealthy (not spend-thrifts)
1) provision like “to maintain standard of living” with two recipients, the meagerly living one will get a meager distribution ot maintian Standard of life while the more labish will get a lavish distribution to maintain SOL
2) in a HELMS-> the pooer child will be treated the same as the other, (both children treated the same regardless of econcomic situation)
spend thrift trust
Beneficiary of a spendthrift trust cannot voluntarily alienate interest in trust. Nor can creditors attach her interest.
creation of Spendthrift trust (varaition)
Must include a spendthrift trust clause in instrument.
UTC holds using phrase “spendthrift trust or similar phrase is sufficient.”
DE and NY make all trusts presumptively spendthrift.
exepctions to spendthift trusts
1) child support/ alimony
2) government claims
intentional tort victims & spendthrift trusts
Spendthrifts trusts will not be reached into for tort creditors, even if there is a criminal and civil liability imposed on the beneficiary
Self-Settled Asset Protection Trust
Trust which gives settlor a beneficial interest that creditors cannot touch.
essentially a spendthirft where settlor is also beneficiary (you can shield yourself from laibility while alive by putting your stuff in one of these)
not all states recognize, UTC does not
spendthirft trusts & creditors (UTC 505)
Person cannot shield assets in trust they create for own benefit. Even if spendthrift, creditors can reach the max amount available for settlor benefit
huber v huber & self settled trusts
case where settlor tired to create a spendthift, but was from a state that did not regonzie them, so he tired to make one in a state that did.
the court did a choice of law anaylsis, and determined that Washington (state settlor was from) had a policy intreest in baring this type of transfer, and transfer was void
choice of law
(1) the trustee or settlor is domiciled in the state;
(2) the assets are located in the state; and
(3) the beneficiaries are domiciled in the state.
