Trusts Flashcards
(26 cards)
Opening Remark
The law of trusts controls the dispersal of personal property to others under the protection of a fiduciary.
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A trust is a fiduciary relationship consisting of 1) Settlor, 2) Intent to create; 3) Trustee; 4) Property; and 5) Ascertainable Beneficiaries.
Requirements to be a trustee
1) Legal capacity; 2) Must be someone other than or in addition to the beneficiary. NOTE: Trustee can be court appointed if the named trustee fails.
What are the duties of a trustee?
1) Administer the trust assets; 2) Inform beneficiaries; 3) Not delegate discretionary duties; 4) Not comingle trust assets with his own; 5) litigate on behalf of the trust; and 6) Adhere to the fiduciary of loyalty.
Define a trustee administration duty:
Trustees have the duty to administer the trust in good faith, in accordance with its governing terms and the interest of the beneficiaries. In most states, trustees are duty-bound to invest trust assets prudently and diversify investments.
Define trustee duty of loyalty:
The trustee fiduciary duty of loyalty excludes self-dealing unless the instrument unless otherwise expressed in the trustee instrument. A trustee must not take an opportunity of the trust, borrow from he trust, or use trust assets as collateral for the personal loan.
What is a spendthrift trust
A trust that prohibits assignments by the beneficiary or attachment of a future distribution by a beneficiary’s creditor.
Suit against the trustee by beneficiaries
The trust beneficiaries may bring suit against the trustee for diminution of the corpus and lost earnings. A court may order a trustee be removed and appoint a successor. A declaratory action may order specific performance of the trustee’s duties or enjoin the trustee in the future.
When does a trust condition providing for termination of a beneficiary’s interest upon marriage is VOID?
In all instances except when the beneficiary is the trust creator’s spouse.
Example of a trustee as a settlor
“I hold 200 Microsoft shares as trustee for my parents”
What is an objective manifestation of a trust?
A requirement of an objective manifestation of a present intent to create the trust for the benefit of another. Note: Actual transfer is not needed if the intent, res, and beneficiary are objectively sufficient.
Define trustee administrator:
The trustee administrator is a fiduciary who holds legal title to and management authority over the res for benefit of beneficiaries. Lack of appointment or directions for a method of appointment of a trustee may indicate lack of intent to create a valid trust.
Trustee capacity requirement:
The trustee must have legal capacity. Corporate trustees such as independent banks are permissible trustees.
Why is convenient to have an independent trustee?
Because appointing a trustee who is also a beneficiary may result in a conflict of interest and increase administration difficulties.
What happens if a named trustee refuses to serve, resigns, or disclaims?
A trust will not usually fail for want of a trustee. A court will appoint a new trustee.
When does a trustee merger occur?
Occurs if the only trustee is or becomes the sole beneficiary. At least one person besides the trustee must own part of the legal equitable title to the res or the trust fails and terminates.
A requirement of a trust property:
A trust must be funded with the settlor’s property “res” that presently exists.
Specific identity requirement of a trust property
Usually, a written deed of trust or another document of title is transferred to the trustee. The property must be sufficiently identifiable.
What are the requirements of a trust with specifying a future interest?
To transfer property, the settlor must presently own the property or must hold a vested future interest on it. Anticipated inheritances and potential future profits are not vesteted, but rather remain mere expectancy. An exception is the right to receive life insurance proceeds which can be the res of a trust despite being a future interest.
Explain a trsut requirement for ascertainable beneficiaries:
A beneficiary must be identified or a definite selection method must be indicated.
Do trust beneficiaries need to accept to be beneficiaries?
Acceptance identified the beneficiaries need not know of the interest.
Are future family beneficiaries considered to be ascertainable beneficiaries?
Yes, unborn beneficiaries (e.g., all my children, nephews, or living descendants) are sufficiently susceptible to identification.
What happens when class beneficiaries are not identifiable?
If too indefinite (e.g., my friends, employees, those of my drinking buddies) the trust may fail.
What is a defined selection of class beneficiaries?
Refers to when a trust instrument directs the trustee to select the beneficiaries from a well specified class and standard for selection is defined, in such a case the trust is enforceable. Example: The best and the brightest of our law shool’s top scholars.
