trusts

Question 1

What is a Settlor/Grantor/Donor/Trustor?

Answer 1

Person who creates/conveys property to the trust

Question 2

Define Trust.

Answer 2

Legal arrangement where settlor conveys property to a trustee to hold as a fiduciary for 1+ beneficiaries.

Question 3

What is an Inter Vivos Trust?

Answer 3

Trust created during Settlor’s life.

Question 4

What is a Testamentary Trust?

Answer 4

Trust created by will, irrevocable once established.

Question 5

Who is a Testator?

Answer 5

Settlor of Testamentary Trust.

Question 6

What is the role of a Trustee?

Answer 6

Takes legal title to the trust property, allowing trustee to deal with third parties as property owner.

Question 7

What do Beneficiaries have regarding trust property?

Answer 7

Equitable title, allowing them to hold trustee accountable for breach of fiduciary duties.

The beneficiaries are typically entitled to distributions from trust, either periodically or at the discretion of the trustee.

Question 8

What distinguishes an Inter Vivos Trust from a Testamentary Trust?

Answer 8

Inter Vivos is created during the settlor’s lifetime, while Testamentary arises from a will.

Question 9

What are the two categories of trusts based on revocability?

Answer 9

• Revocable
• Irrevocable

Question 10

What is required for the creation of a trust?

Answer 10

Generally, no writing is needed, but land and testamentary trusts must be in writing.

creation by decrlation: settlor is the trustee
creation by deed: someone else is the trustee

Question 11

What is the Merger principle in trust law?

Answer 11

If the same person is sole trustee and beneficiary, trust merges and is no longer a trust.

(rare, there is often someone who can take as beneficiary)

Question 12

Define Bifurcation in the context of trusts.

Answer 12

Hallmark of common law trust where trustee holds legal title and beneficiaries have equitable ownership.

Question 13

What issues arise from bifurcated ownership?

Answer 13

• Asset Partitioning
• Fiduciary Administration

Question 14

What is Asset Partitioning?

Answer 14

• separate the personal property and obligations of an organizations insiders from the property and obligations of the organization
• effect on rights of third parties w/ regard to trust property and property of trustee

relevant for organizations & traditional views on trusts. now trustee doesnt need to indemnify out of trust, instead harmed person (creditor ex.) can take right from trust

Question 15

How does modern trust law treat trustees?

Answer 15

a creditor of a trustee in the trustee’s fiduciary capacity recovers directly out of the trust fund without recourse against the property of the trustee personally.

• Splits trustee into two persons: an individual acting on his own behalf and a legal person acting for the beneficiaries.

Question 16

What are the duties of a trustee?

Answer 16

• Duty of loyalty
• Duty of prudence
• Duty of impartiality
• Duty not to commingle trust property
• Duty to inform/account to the beneficiaries

Question 17

What remedies are available for breach of fiduciary duties?

Answer 17

• Compensatory damages to restore trust estate to what they would have been
• Disgorgement of profits (from trustee)

Question 18

List the four functions of trusteeship.

Answer 18

• Custodial function
• Administrative function
• Investment function
• Distribution function

Question 19

What is the Waste & creditor Problem in a Legal Life Estate?

Answer 19

Life tenant cannot create waste for future tenants and has a duty to pay taxes/repair property.

Creditors can seize a person’s interest and sell it

Question 20

What are Business Trusts?

Answer 20

Common form for businesses before corporations, used for mutual funds, asset securitization, and pension funds.

Question 21

What statutes govern statutory business trusts?

Answer 21

• DE Statutory Trust Act
• Uniform Statutory Trust Entity Act

Question 22

What is Fiduciary Administration

Answer 22

powers/duties of the trustee and the corresponding rights of beneficiaries.

Question 23

define duty of loyalty

Answer 23

trustee must administer trust solely for beneficiaries; self-dealing is prohibited

Question 24

define duty of Prudence

Answer 24

trustee is held to an obj. std of care of a prudent person in like circumstances and must administer trust in manner suited to purpose of trust and the circumstances of the beneficiaries

Question 25

Legal Life Estate

Answer 25

Legal life tenant has no power to sell/mortgage/lease fee simple unless granted in instrument creating life estate. To sell fee simple all remainder persons/reversioners must agree to sale or life tenant must get judicial approval.

Question 26

Equitable Life Estate: Trust

Answer 26

Resolves many of the problems with a legal life estate by giving the trustee broad powers to act on behalf of the trust and solve competing interest between life interest holder and remainder holder

Question 27

What are the four requirements for the creation of a trust?

Answer 27

1. Intent by the settlor to create a trust 2. Ascertainable beneficiaries who can enforce the trust 3. Specific property, the res, to be held in trust 4. a writing may be required to satisfy the Wills Act or the Statute of Frauds.

Question 28

What is a testamentary trust?

Answer 28

A trust created by a will, requiring construction of the will to determine if a trust was created unless clearly stated.

Question 29

What must be inferred from a will that does not explicitly state a trust?

Answer 29

The property may be inferred to be held by someone else based on language such as 'shall be maintained.' Ie awill that doesnt explicitly say "this is atrust" may still be considered a trust.

Question 30

Who is typically named as a trustee in a testamentary trust?

Answer 30

The executor is to be named as a trustee unless contrary intent appears in the will.

Question 31

What does "A trust will not fail for want of a trustee" mean?

Answer 31

if no trustee the court will appoint one

Question 32

What happens if a named trustee refuses appointment or dies?

Answer 32

The court will appoint a successor trustee.

Question 33

What is 'precatory language' in the context of trusts?

Answer 33

Language that creates an unenforceable moral obligation rather than fiduciary duties. (wish hope reccomend)

Question 34

What is a deed of trust?

Answer 34

A document that does not require satisfying formalities unlike a deed of wills, which must comply with the wills act/statute of frauds.

Question 35

In Jimenez v. Lee, what created a trust?

Answer 35

The transfer of property with intent to vest beneficial ownership in a third person. (for the benefit of the children) father violated his duty as trustee by investing her the $.

Question 36

What must a person do to accept trusteeship?

Answer 36

They must accept by words or conduct.

Question 37

What is the rule regarding resignation of a trustee under UTC § 705?

Answer 37

A trustee can resign with 30 days' notice to all interested parties.

Question 38

What does 'res' mean in the context of a trust?

Answer 38

The property of the trust.

Question 39

What did the court find in Unthank v. Rippstein regarding the creation of a trust?

Answer 39

A trust must provide a monetary source to be effective. The court found that this did not create a trust because Craft did not specify what portion of his property would serve as the res of the trust. Without having a source for the money, the promise was unenforceable.

Question 40

What is required for a trust created by declaration of trust?

Answer 40

A manifestation of intent by the settlor to hold certain property in trust for one or more beneficiaries.

Question 41

What must be transferred to the trustee for a trust created by **deed of trust**?

Answer 41

A transfer of property. trust by declration does not need a transfer of property

Question 42

What did the court hold in Brainard v. Commissioner regarding future profits as trust property?

Answer 42

There was no trust because there were no profits at the time of the declaration. he made a provision in his trust accounting for potentially earned stocks "An expectation or hope of receiving property in the future, or an interest that has not come into existence or has ceased to exist, cannot be held in trust"

Question 43

Fill in the blank: An expectation or hope of receiving property in the future cannot be held in _______.

Answer 43

trust

Question 44

Traditional law about accepting trustee position

Answer 44

Once a person accepts appointment as trustee, under traditional law can be released from office only w. consent of beneficiaries/court

Question 45

What is the beneficiary principal, outlined in UTC 402(a)(3)?

Answer 45

a trust must contain At least one ascertainable beneficiary to whom the trustee owes fiduciary duties ## Footnote No need to be ascertainable when trust is created, only during the period applicable by rule of perpetuities.

Question 46

What was held in Clark v. Campbell regarding private trusts?

Answer 46

A valid private trust requires definite and ascertainable beneficiaries with and is to be distributed in specific proportions (unlike public trusts) ## Footnote Common law requires a beneficiary or class for private trusts.

Question 47

What does the beneficiary principle not apply to?

Answer 47

Charitable trusts (attoreny general can sue ) ## Footnote There is a trend toward removing it for trusts for animals and some noncharitable purposes.

Question 48

What was the holding In re Searight’s Estate?

Answer 48

Bequest for care of a specific animal is valid if person receiving gift for benefit of animal accepts gift and agrees to carry out wishes of testator and the will properly limits the period of time in which the bequest is to be carried out ## Footnote The court found the bequest valid if the recipient agreed to carry out the testator's wishes.

Question 49

What is an honorary trust?

Answer 49

A trust where the dog cannot be a beneficiary but can be used for care of an animal, gravesite, or monument ## Footnote Honorary trusts do not obligate the trustee to carry out the trust. but if they dont property will revert to sucessors

Question 50

can an inter vivos trust to be orally declared?

Answer 50

An inter vivos trust can be oral, but a testamentary trust must be in writing to satisfy statute of frauds.

Question 51

What must be established to create a valid oral trust according to UTC § 407?

Answer 51

Creation and terms of an oral trust may be established by clear and convincing evidence.

Question 52

What was the outcome in In re Estate of Fournier?

Answer 52

A valid oral trust was created by transferring property with the intention for the transferee to hold it for a definite beneficiary dropped off bags of money to his neigbhors, if he hadnt dropped of the money, his will would have kicked in and the transfers would have gone intestate ## Footnote The court found clear error in the previous ruling regarding the intent of the settlor.

Question 53

What was held in Olliffe v. Wells regarding trusts in wills?

Answer 53

A trust not declared on the face of the will cannot be set up by extrinsic evidence to defeat heirs' rights. here it was unclear if the testator was passing to rev. for rev, or for the purpose of charities.

Question 54

What is the difference between secret and semi-secret trusts?

Answer 54

Secret trusts do not indicate a trust, they leave money but with no written purpose in the will(to x), while semi-secret trusts indicate a trust but do not identify a beneficiary (to x for y) ## Footnote Courts may impose constructive trusts in cases of secret trusts.

Question 55

What is the courts response to a secret trust?

Answer 55

constructive trust the person given the property will not get it, and it will instead be past to intestacy

Question 56

What do courts consider when dealing with oral express trusts of land?

Answer 56

Cases are split between 1) allowing the trustee to keep the land(statute of frauds) or 2) imposing a constructive trust for the benefit of the beneficiary(formalities).