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Flashcards in Trusts Deck (107)
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1

Three Types of Trusts

1. Express trusts (true trust)
2. Resulting trusts (equitable remedy)
3. Constructive trusts (equitable remedy)

2

Express Trust - Defined

A legal device allowing an owner of property to make transfers of property and to have those assets managed on behalf of someone else.

3

Who is the person who creates the trust?

the settlor

4

What does the settlor do?

Gives LEGAL TITLE to a TRUSTEE to manage the assets on behalf of the BENEFICIARY

5

Two Types of Express Trusts

1. Lifetime/inter vivos trusts
2. Testamentary trust

6

8 Requirements for a Valid Trust

1. SETTLOR who makes a
2. DELIVERY of legal title to
3. PROPERTY to a
4. TRUSTEE who holds legal title for the benefit of a
5. BENEFICIARY with?
6. INTENT to create a trust for
7. a LAWFUL PURPOSE
8. in a VALIDLY EXECUTED document

7

Is consideration required to create a trust.

No. It's a gift.

8

Who can be a Settlor?

Anyone over 18 with the mental capacity to enter into contracts.

9

Delivery Requirements for Titled Assets

Titled assets must be FORMALLY transferred to the trustee for the delivery to be valid.e.g. cars, planes, houses, stock certificates

10

Property - Current Ownership

The Settlor must actually own the property - NOT merely have an expectation of ownership in the future (no remainderman!)

11

Property - Identification

Property in the trust must be specifically identified.

12

Who can be a trustee for a lifetime/intervivos trust?

Almost anyone can be a trustee.

13

Who can be a trustee for a testamentary trust?

Anyone EXCEPT:
1. under 18
2. Judicially declared incompetent
3. Convicted felons
4. Incapable because of drunkenness, dishonesty, lack of understanding, or improvidence

14

Can a non-resident alien serve as a trustee?

ONLY IF
1. that person is related; AND
2. A NY resident serves as co-fiduciary

15

What effect if the Settlor fails to name a trustee?

Doesn't matter - the court will appoint a trustee.

16

Beneficiaries - Requirements

Must be DEFINITE and ASCERTAINABLE

17

What happens if the beneficiary is ambiguous?

The trustee holds in a RESULTING TRUST for the RESIDUARY BENEFICIARY of a will (or intestate heirs)

18

Beneficiaries - Are relatives such as "family" definite and ascertainable?

Yes - you look to the intestacy statutes.

19

Intent Requirements

1. Settlor must intend to create an ENFORCEABLE obligation.
2. Trustee must be given DUTIES to perform

20

Intent Requirements - Precatory Language

It is non-binding language that does not fulfill the intent requirement

21

Intent - Lack of Trustee Duties

It becomes a PASSIVE trust, which is NO TRUST AT ALL.

22

Lawful Purpose (3 Limitations)

Trust cannot call for the
1. commission of a crime
2. destruction of property
3. acts that are against public policy

23

Lawful Purpose - Examples of acts that are against public policy

A trust restricting marriage or promoting divorce

24

Lawful purpose - permitted type of marriage restriction

OK to make conditional upon marriage to a certain religion

25

Trust Execution Requirements

Must be IN WRITING signed by BOTH SETTLOR AND TRUSTEE
i. acknowledged by a notary public, OR
ii. signed by two witnesses

26

Are trusts revocable?

Trusts are PRESUMED irrevocable UNLESS the trust explicitly authorizes revocation.

27

Revocable Lifetime/Intervivos Trusts - Requirements

At least one beneficiary who is not the settlor; Settlor CANNOT be the sole beneficiary when also named as the SOLE trustee.

28

Revocable Lifetime/Intervivos Trusts - What roles can the settlor have?

1. Can be A trustee
2. Settlor can be an INCOME beneficiary
3. Settlor's estate can be one of the beneficiaries of principal so long as there is at least ONE other beneficiary.
4. Settlor can retain the power to TERMINATE or AMEND the trust.

29

Reasons for having a revocable lifetime/intervivos trust

1. Manages assets efficiently, particularly using a professional trustee.
2. Plan for possible incapacity by avoiding an incompetency proceeding.
3. Avoid probate upon SETTLOR's death

30

Reasons to NOT have a revocable lifetime/intervivos trust

It does not avoid federal estate taxes if the settlor keeps
1. an income interest, or
2. a power to revoke