Module 6: Trusts Flashcards
(19 cards)
Types of trusts
intervivos vs. testamentary
oral vs. written
revocable vs. irrevocable
express vs. implied
Elements of a trust
1) settlor: creates the trust
2) method of creation: deed of trust or declaration of trust
3) trustee: holder of legal title
4) beneficiary: holder of equitable title
5) res/corpus: the contents of the trust, the property held in the trust
Methods to create
deed of trust - written transfer to another
declaration of trust - hold as trustee
Trustee
the holder of the legal title of the corpus of the trust
may be individual, institutions, multiple people
may be settlor, beneficiary, or third party
if not named, the court WILL appoint one
Duties of trustee
1) loyalty
2) prudence
3) delegation
5) property duties
- no commingling
- collect and protect
6) impartiality
7) accounting and information
Trustee duty of loyalty
- no self-dealing (ABSOLUTE DUTY)
- no conflict of interest
- trustee responsible for any loss due to breach and may be removed
Trustee duty of prudence
- duty of inquiry
- exercise prudent discretion
- duty of investment
1) manage as a prudent person would own affairs
2) portfolio theory: manage trust as a whole, duty to diversify
3) duty to retain if so ordered
Trustee duty of delegation
- can delegate administrative or ministerial tasks
- CANNOT delegate discretionary tasks
Duties when multiple trustees
- act as a whole
- majority decides if three or more
Trustee property duties
1) collect and protect
2) earmark
3) not to commingle
4) keep adequate records
5) bring and defend claims
Trustee duty of impartiality
required trustee to fairly consider interests of all beneficiaries when managing the trust
Functions of a trustee
1) custodial
2) administrative
3) investment
4) distribution
Requirements for beneficiary
- must be identified
- may be groups, individuals, institutions
- where future interests rest today
Presumption for Revocable or Irrevocable Trust
Majority: presume written trust is irrevocable, unless provision to the contrary
Minority: presume written trust is revocable unless provision making irrevocable (TX)
Resulting trust
Express trust that fails
- Trustee has no continuing fiduciary relationship
- Trustee must return property to beneficial owner
- Trust by reversion
Constructive trust
remedy imposed in circumstances where the person holding property cannot, in equity, retain the beneficial interest
All trusts MUST have beneficiaries except
charitable or honorary trusts
Semi secret trust
existence of the trust and the trustee are disclosed in the will, but not the terms or the beneficiaries
Secret trust
neither the existence nor the terms is disclosed to anyone
