Trusts Flashcards
How is a “trust” formed?
Creator delivers legal title of true assets (the res) to the trustee for the benefit of beneficiaries, with intent to create a trust for a valid purpose.
What is “delivery” of the trust?
For inter vivos trust with a 3rd party as the trustee, there must be actual delivery of the subject matter of the trust.
Who holds legal title to the res?
The trustee
What are some trust conditions that are deemed void as a matter of public policy?
(1) preventing marriage
(2) encouraging divorce
(3) encouraging crimes
(4) restraints on right to procreate
(5) restraints on free practice of religion
What must be clear about the res (the subject matter of the trust)?
Must be CERTAIN and IDENTIFIABLE, or else there is no trust. Must be an actual segregation of property.
What if A creates a trust for property that has been devised to him in a will, but he does not yet own because testator is still alive.
Until testator dies w/o changing will, and the will is admitted to probate, A’s “trust” is actually just a gratuitous promise to grant a trust in the future. It isn’t an actual trust.
Even after testator dies and A owns property, A must reaffirm his intent to create a trust properly.
What if the appointed trustee is dead at the time the trust was meant to become effective?
No trust will fail for want of a trustee.
A trustee will be appointed if there was a clearly manifested intention to create a trust- unless it was conditional on this particular person being the trustee. (“Powers personal to the named trustee”)
A is the residuary legatee under the valid will of deceased B. Before taxes and other charges against B’s estate are known, A in writing declares herself trustee of her interest as residuary legatee for the support of her children. Thereafter, $1M is distributed by the executor to A. Is there a valid trust?
Yes.
After testator has died, legatee has more than a mere expectancy, she has a real interest. Her interest may be the subject matter of a trust or gift, even if the size of her interest is not yet ascertained.
The res is “certain and identifiable” because the interest is A’s RIGHT to receive (not the amount). A’s right is certain and identifiable.
What if A writes a trust instrument naming X as trustee, and provides that during A’s life the income from trust property is to be distributed to A, but at A’s death the income is to go to Wife for life. A never transfers any assets to trust, but names trust as beneficiary under several of his life insurance policies. Is this a valid trust?
Yes. An otherwise empty trust is valid if it is named as the direct beneficiary of a life insurance policy or a pension plan death benefit.
T’s will left $100,000 “to my friend L, in trust for my friends.” Is this a valid trust?
NO. Private trusts must have ascertainable beneficiaries.
However, the majority rule today is that L can exercise his power of appointment and distribute. If this power is recognized and L fails to exercise it, the trust property will return to T’s estate by resulting trust.
T’s will creates a testamentary trust for the benefit of her descendants, with the shares of each left to the discretion of the trustee. Is this a valid trust?
Yes. The class of beneficiaries is defined. It is okay to leave discretion to the trustee as to the shares among the beneficiaries.
T’s will left $250,000 to Bank as trustee, “to pay over the income and dividends to train spiritualistic mediums.” Is this a valid trust?
It depends on whether this can be classified as a Private Trust or a Charitable Trust.
If this is a Private Trust, then it is invalid because it does not have ascertainable beneficiaries.
If this is a Charitable Trust, then it is okay because it has a reasonably large and unidentifiable beneficiary segment.
When V learned that T was to be married, she executed a $100,000 trust for “T’s future children.” T was jilted by his Fiancee’ and then V died shortly thereafter.
Is this a valid trust?
What if T never has children?
This is a valid trust. Beneficiaries need not be alive yet, just properly described.
If T never has children, the $100,000 will be returned to V’s estate by “resulting trust”
Father devises $5,000 to daughter “as trustee,” to spend the principal and income for the care of Father’s 3 dogs. Rest of estate to Son. Is this a valid trust?
This is an “honorary trust.”
At common law, these are void.
Under the UTC (1/2 of states), valid for lifetime of animals.
If valid:
-Court could appoint an enforcer, if one isn’t named in trust instrument.
-If money is left over at dogs’ death, goes back to Father’s estate by resulting trust.
T puts asset in revocable trust with herself and son C as co-trustees and herself as beneficiary of income during her life. On T’s death, trust to be held for C’s daughter B. T executed a will devising residuary estate “to the trust of which I am co-trustee with my son C.”
(1) Can T be both trustee and beneficiary?
(2) Are revocable trusts valid?
(3) Is gift by will to the revocable, amendable trust valid?
(4) What if T revokes trust prior to death?
(1) Yes, T can be both trustee and beneficiary. However, T can’t be sole trustee AND sole beneficiary. Must be more than her on one side of the trust.
(2) Revocable trusts are still valid, yes.
(3) Gift by will to a revocable trust so long as it is clearly identified in the will and its terms are set out in a written instrument. Instrument may be executed before, concurrently with, or after the will.
(4) If T revokes trust before she dies, the gift in will lapses.
What is a “totten trust?”
A totten trust is a form of trust where settlor places money in bank account with instructions that upon settlor’s death, whatever is in the account will pass to a named beneficiary.
What if provisions in T’s will are inconsistent with the instructions placed with a totten trust? Example: T’s will says “I give my Chase Bank Account to D.” Signature at Chase Bank says “T, trustee for C.” Who gets the account, D or C?
Majority:
-totten trust is revoked by T’s will. D wins.
UPC:
-No revocation by will. C wins.
What if the beneficiary of a totten trust predeceases the depositor?
Totten trust is automatically revoked and bank account is treated normally.
Is an inter vivos oral trust enforceable?
(1) Oral trust of personalty:
Enforceable IF its terms can be established by CLEAR AND CONVINCING evidence.
(2) Oral trust of realty:
must be in writing to satisfy Statute of Frauds
If there was an oral trust containing land (invalid), is there any way that the intentions of the trust will be enforceable?
Yes, if a constructive trust is imposed due to:
(1) Fraud in inducement (trustee lied intentionally when he told settlor they would take care of beneficiary), OR
(2) a confidential relationship between settlor and trustee (such that trustee may try to take advantage of confidential relationship to enrich himself). Must show that trustee agreed to hold property in trust.
T orally agreed with her valet S that she would devise her home to him if he would forgo any weekly salary and remain in T’s employ as long as she lived. S fulfilled his commitment, but T didn’t include any provision in her will for S’s benefit. What happens?
Majority:
S out of luck. Contracts to devise land must be in writing to satisfy SOF. However, S can sue for quantum meruit for services rendered.
UPC:
S out of luck. Must be in will, written contract, or referred to in the will w/ supportive extrinsic evidence.
T dies leaving a will that devises Blackacre to J. The will makes no mention of any trust. T’s secretary, S, alleges that T orally told J to hold Blackacre in trust for S and that J agreed. Can S enforce the promise?
S can try, and her testimony will be admissible to show the existence of a promise to hold in trust. SOF is inapplicable because this is a WILL not a DEED.
S needs to show clear, satisfactory, and convincing evidence (more than preponderance). If she does, a constructive trust will be implied for her benefit.
T dies leaving a will that devises Blackacre to J. Accompanying the will is an envelope addressed to J. Inside is a typewritten note, signed by T, instructing J to hold the land in trust for S, T’s secretary. Is this a valid trust?
No. J never agreed to be trustee, so J gets Blackacre outright.
T’s will devises land “to my good friend S, for purposes I have already communicated to him.” S is willing to identify T’s purposes and intended beneficiaries and is willing to serve as trustee. T’s heirs object, saying no valid trust was created. What is the result?
Majority rule:
S holds on a resulting trust for T’s heirs. Because the beneficiaries are not identifiable in the will, this violates the Statute of Wills. S can’t comply even if he wants to.
What are the four primary rules for Charitable Trusts?
(1) Not subject to either Rule Against Perpetuities or Rule Against Accumulations
(2) Must be for charitable purpose.
(3) Must be in favor of reasonably large and unidentifable beneficiaries.
(4) When specific charitable purpose can no longer be accomplished, may be reformed under the doctrine of cy pres.
What are the six most common purposes of a charitable trust?
(1) Religion
(2) Medicine
(3) Science
(4) Governmental (parks)
(5) Research
(6) Education
What is a common functional problem of some intended charitable trusts?
There must be a way of policing the use of the trust money to make sure it is being used for the objective of the trust.
For example, distributing money directly to school children “for education purposes” isn’t going to work.
T executes a trust to provide scholarships to University of Oregon for all residents of Salem, Oregon whose last name is Britton. Is this a valid charitable trust?
No, too few people.
If it was expanded to Marion County for those named “Smith”…perhaps. Not sure where the line exactly is for trust to benefit enough people.
If trust gives preference to a certain group of people, can it be a charitable trust?
The preference clause isn’t fatal, it just depends how the trust actually functions in fact.
Who enforces a Charitable Trust, since it has no ascertainable beneficiaries?
Usually the state Attorney General enforces charitable trusts. Settlor, while living, can also enforce. Any living beneficiary may also enforce.
What if a charitable purpose of a trust can no longer be accomplished? What happens to the trust?
Court may (and usually do) reform under the doctrine of cy pres.
Look for the primary intent of the charitable trust.
Then look at the specific direction of the charitable trust.
