Trust Formation Flashcards
Requirements of a Valid Trust
- **Trust Intent **based on (i) splitting legal and equitable title; and (ii) imposition of fiduciary duties on title holder
- Identifiable Corpus = anything transferrable
- Ascertainable Beneficiaries = person who can take or hold title
- Proper Purpose = not illegal or against public policy
- Compliance with Formalities
Inter Vivos Trust
Definition: creataed while alive through either (i)* declaration of trust* = settlor declaring himself trustee or (ii) conveyance trust = settlor transfer title to trust
Testamentary Trust
Definition: Created upon settlor’s death in settlor’s valid will
Formalities of Trust Formation
Testamentary Trust:
-Essential terms ascertainable from will, incorporated documents, facts of independent significance, or exercise of power of appt.
-If Secret Trust = oral agreement of trust with trustee but no actual trust–> can be constructive trust
-If Semi-Secret Trust= gift in trust without beneficiary –> resulting trust for testator’s heirs
Inter Vivos Trust
1. Declaration of Trust by owner that he holds in trust OR
2. Transfer of property from settlor to trustee
3. Writing Requirement: Only if trust of land
Charitable Trust Requirements/Characteristics
- Intended to Benefit the Public
- Indefinite Beneficiaries
- May be Perpetual
- Enforceable to by AG, not by beneficiaries
Cy Pres
Where the purpose of Charitable Trust is impracticable or wasteful, a court will assign a new charitable purpose if:
1. Settlor had general charitable intent (presumed)
2. that purpose is as near as possible to the intended purpose = doctrine of equitable approximation
Honorary Trust
Non-Charitable Purpose with no private beneficiaries who can enforce the trust
Trustee may choose to carry it out but only enforceable under the UTC for 21 years –> *otherwise resulting trust for settlor’s estate**
Intent to Create Trust Requirement
- Must intend trust to take effect immediately
- Intent by words or conduct while settlor owns the property
- If precatory expressions –> presumption of no trust must be overcome by other evidence
Trustee Requirement for Formation
-Inter Vivos Trust: Trustee must be named
-Testamentary Trust: Failure to name or named trustee declined does not defeat –> court will appoint
-Settlor may declare himself trustee
-Trustee Must have duties
Ascertainable Beneficiaries Requirement
- Capable of taking and holding property
- Susceptible to identification
- Beneficiary must accept (presumed)
Proper Purpose Requirement
Not:
1. Illegal
2. Impossible to achieve
3. Contrary to public policy
4. Intended to defraud settlor’s creditors
Resulting Trust
Definition: A trust imposed where intention fails for settlor’s heirs
Formed when either:
1. Honorary Trust not carried out by trustee
2. Secret Trust with no ascertainable beneficiaries
3. Purchase Money Resulting Trust = person not closely related taking title did not supply consideration –> trustee’s sole duty to convey title to one furnishing consideration
Constructive Trust
Equitable Remedy to Prevent Unjust Enrichment based on:
-Fraud
-Theft
-Breach of fiduciary duty
-Breach of fraudulent promisse
Will Substitutes
- Revocable Trust = interest passes during life but only becomes possessory at death –> *may be unfunded during testator’s lifetime as pour-over will
- Life Insurance Trust = assignment of a policy to a party to hold in trust –> beneficiaries may be contingent
- Totten Trust Bank Accounts = trustee-depositor has full rights during lifetime that is revoked based on intent, subject to trustee’s creditors claims, and automaticlaly terminates if beneficiary predeceases depositor
Revocation of Trust
- By Settlor: must be explicitly reserved and included power to modify
- By Beneficiaries: Consent of all beneficiaries (not possible if remote unborn beneficiaries) + will not interfere with material purpose
-
By Court: if either:
-Trust purposes accomplished or become illegal or impossible
-Changed circumstances make compliance incompatible with trust purpose
