Trusts Flashcards
What is an express trust? What are the two categories?
Created by the express intention of the settlor
- Private: private beneficiaries
- Charitable: charitable beneficiaries
What are the five elements of a valid trust?
- Intent
- Identifiable corpus
- Ascertainable beneficiaries
- Proper purpose
- Mechanics and formalities
What are the five elements required for an express trust?
- Settlor with capacity to convey
- Present intent to create a trust relationship
- Competent trustee with duties
- Definite beneficiary
- Same person isn’t sole trustee and beneficiary
What is sufficient trust property? Insufficient?
- Must be an existing interest in existing property
- Property the settlor cannot transfer or does not yet own can’t be trust property
What is a qualified beneficiary?
On the date the beneficiary’s qualifications are determined is, (1) A current beneficiary; (2) a first line remainderman
What happens if a trust fails for lack of a beneficiary?
Resulting trust in favor of the settlor of their successors is presumed
When will a trust purpose be invalid?
Illegal
Contrary to public policy
Impossible to achieve
Intended to defraud settlor’s creditors
What is required to show intent to create a trust?
- No formal words required - can be written or spoken
- communication of intent to beneficiaries not necessary
- intention to create a present trust must have been externally manifested by the settlor at the time they owned property and prior to its conveyance to another
- must intend trust to take effect immediately
How does a person accept a trusteeship?
Signing the trust or a separate written occurrence
Substantially complying with the acceptance terms
Accepting delivery of the trust property
How can a trustee be removed?
- Serious breach of trust
- Serious lack of cooperation among co-trustees
- unfitness, unwillingness, persistent failure to admister
- Substantial change in circumstances
What is a pour gift from will to trust?
Settlor can make gifts by will to trust established during their lifetime
-Pour over property can be the initial trust funding if:
Trust is identified in the will
Trust is executed before the testator’s death
What is a testamentary trust? How created?
Created in settlor’s valid will
-trust intent and essential terms must be ascertained from the will itself, from writing incorporated by reference into the will, or from exercise of power of appt created by will
When will constructive trust be imposed?
(Secret trust)
Settlor agrees with a will beneficiary that the beneficiary will hold the prop in trust for someone else, doesn’t state trust nature of the gift, reliance on bene’s promise to hold property in trust for another
If the promise can be proven by clear and convincing evidence, a constructive trust will be imposed on the property in favor of the intended trust bene
What is a semi-secret trust?
Gift in will to a person “in trust” but doesn’t name bene
Extrinsic evidence not allowed to prove
Trustee holds on resulting trust for testator’s legatees or heirs
What is a discretionary trust?
Trustee is given discretion whether to apply or withhold payments of income or principal to bene
What are the creditor’s and bene’s rights in a discretionary trust?
Before trustee exercises their discretion to make payments to bene, bene’s interest is not assignable and cannot be reached by their creditors
Bene - no right to payment that they can enforce against the trustee
What is a spendthrift trust?
Precludes the beneficiary from voluntarily or involuntarily transferring their interest in the trust, and bene’s creditors are precluded from reaching it to satisfy their claims
=restraint on alienation
=bene can’t transfer interest
=creditor’s can’t attach
If settlor is beneficiary can they use spendthrift trust?
Settlor can’t use spendthrift trust to protect their own property from their own creditors
A spendthrift clause can’t be used to shield bene from:
- judgments or court orders for child or spousal support
- claims by the gov’t
What is a support trust?
A support trust directs the trustee to pay only so much of the income or principal as is necessary for the bene’s support
- can be mandatory or discretionary
- not assignable
- standard of support = bene’s accustomed standard of living
How does trust terminate?
1) By its express terms (i.e upon person’s death, date, when person reaches age0
2) By the settlor
3) By the Beneficiaries
- with settlor’s consent
- consent of ALL benes (even unborn or unascertained) w/o settlor’s consent if no material purpose of the trust would thereby be frustrated
When will a court terminate or modify a trust?
- Unanticipated circumstances threaten the purposes of the trust
- continuation of the trust on its exisiting terms is impracticable or wasteful
- value of trust is insufficient to justify cost of admin
What are the sources of trustee’s power?
- Expressly conferred upon them by terms of the trust
- Powers granted by state law
- Implied powers that are appropriate to achieve the proper investment, mgmt, and distribution of the trust property : sell/lease trust property, incur reasonable expenses, hire agents, mortgage trust property, repair
What are the duties of the trustee?
Owe fiduciary duties to the beneficiaries of the trust
- duty to administer trust in good faith and in prudent manner
- duty of loyalty (can’t buy/sell trust assets, can’t sell property of one trust to another trust, can’t borrow trust funds or loan their personal funds to the trust, can’t use trust assets to secure a personal loan, can’t personally gain through position)
- duty to report
- duty to separate trust property and keep records
- preserve and make trust property productive
