Trusts and Future Interests

Question 1

Revocable versus Irrevocable Trusts

Traditional Rule

Answer 1

A trust is presumed to be irrevocable unless it expressly states otherwise.

Question 2

Revocable versus Irrevocable Trusts

Majority and Uniform Trust Code

Answer 2

A trust is presumed REVOCABLE unless it expressly states otherwise.

A revocable trust can be terminated or modified by the settlor at any time.

An irrevocable trust usually cannot be terminated.

Question 3

Mandatory vs. Discretionary Trust

Answer 3

• Mandatory Trust- REQUIRES the trustee to distribute ALL trust INCOME
• Discretionary Trusts- trustee is given power to distribute income at their discretion.

FOR BOTH: trustee is subject to an abuse of discretion standard.

Question 4

Rule Against Perpetuities

for Trusts

Answer 4

Trusts are subject to the RAP
Charitable trusts are NOT subject to the RAP

Question 5

Grantor/Settor

Answer 5

creator of the trust

Question 6

Trustee

Answer 6

holds legal interest OR title to trust property

Question 7

Beneficiaries

Answer 7

Receive the benefit of the trust.
TIP: when writing a trusts essay, identify the two types of beneficiaries.

Question 8

Income Beneficiaries

Answer 8

Receive income from the trust

Ex. Profits from a business held by the trust or rental income from property held by the trust.

Question 9

Remainder Beneficiaries

Principal Leftovers

Answer 9

entitled to the trust principal upon termination of the trust

Question 10

Express Trusts

Answer 10

TIP: The MEE does not heavily test whether the trust formalities have been complied with. If facts say there is a valid trust, don’t analyze elements of a trust.

Question 11

Private Express Trust

Answer 11

• A private express trust clearly states the intention of the settlor to transfer property to a trust for the benefit of one or more ascertainable beneficiaries.

Question 12

Intent

For a Private Express Trust

Answer 12

The settlor must intend to make a gift in trust.
The settlor’s intent may be manifested orally, in writing, or by conduct.

Question 13

Trust Property

For a Private Express Trust

Answer 13

• When the trust is created, there must be some property that is put into the trust.
• May be real property, money, personal property, intangibles, partial interests, or future interests (whether vested or contingent)

Question 14

Trust Property Tip

Answer 14

TIP: If a trust is invalid due to lack of property being put into it when it’s first created, AND the settlor later puts property into the trust and manifests intent to create the trust at the time the settlor put the property in it, it will be a valid trust.

Question 15

Valid Trust Purpose

Answer 15

A trust can be created for any purpose, as long as:
* its not illegal
* restricted by rule of law or statute or
* contrary to public policy.

Question 16

Trust Purpose against Public Policy

Answer 16

Terms that violate public policy will be stricken from the trust, the trust will not fail overall unless the removal of the terms is fatal.

Ex.

• Provisions restraining a first marriage generally held to violate PP
• Restraint on marriage might be upheld if trustee’s motive was merely to give support for a B while B is single.
• Restriction on surviving spouse remarrying after death of settlor is likely to be upheld.

Question 17

Ascertainable beneficiaries

Answer 17

Bs must be IDENTIFIABLE
Settlor can refer to outside writings/acts to ID Bs

Question 18

Exceptions to identifiable Bs

Answer 18

• INDEFINITE CLASS. Trustee can choose B from indefinite class (e.g. “my friends”), unless trustee must distribute equally to all members of the indefinite class (not valid)
• UNBORN CHILDREN: Trusts for benefit of unborn children are VALID, even though the Bs are not yet ascertainable at time of trust creation.
• CLASS GIFTS: Trusts for a reasonably definite class (e.g., “my brothers,” or “my children”) will be upheld
• CHARITABLE TRUSTS: Can’t have individual ascertainable Bs

Question 19

Writing Requirements for Trusts

Answer 19

• If T INVOLVES REAL PROPERTY, must be in WRITING to comply with SoF
• If T is a TESTAMENTARY T (takes effect on death of Settlor) then the T needs to meet the statute of wills in jx which may mean it needs to be in WRITING and meet other requirements (like being signed by witnesses)

OTHERWISE, NO WRITING IS REQUIRED TO FIND A TRUST

EXAM TIP: If dealing with nontestamentary trust, or an amendment to a nontestamentary trust, no requirement that WILL formalities be met.

Question 20

Types of Private Express Trusts

Answer 20

Intervivos Trust
Testamentary Trust

Question 21

Inter vivos trust

Answer 21

T created while Tor is living that transfers some or all of the Tor’s property into a trust.

Tor can designate himself or 3P as Tee

Question 22

Pour-Over Provision

in a Inter vivos Trust

Answer 22

A provision in a WILL that directs distribution of property to a trust, so the property passes according to terms of the T

• A will may “pour over” assets into a trust, even if T is not in existence when will is executed; later amendments to T are also valid
• Inter vivos trust doesn’t need to be executed with the same formalities as a will.

Question 23

Testamentary Trust

Answer 23

Created in writing in a will or in a document incorporated by reference into a will

The will containing the trust must meet the attested or holographic will requirements

Question 24

Charitable Trust

Large stated purpose

Answer 24

Must have a stated charitable purpose for the benefit of the community at large OR for a large class of persons

Question 25

What is considered a Charitable Purpose?

Answer 25

Purposes include: * the relief of poverty * the advancement of education or religion * other purposes benefiting the community at large or a particular segment of the community TIP: funding a specific political party is NOT a charitable purpose.

Question 26

Indefinite Beneficiaries | of Charitable Trusts

Answer 26

Must benefit the community at large, or a class comprising unidentifiable members NOT a named INDIVIDUAL or a NARROW group of individuals.

Question 27

Cy Pres Doctrine

Answer 27

A court can modify a charitable trust to seek an alternative charitable pupose if the original one becomes illegal, impracticable, or impossible to perform **TIP: **Look for facts showing that a T was created for the benefit of a charity that no longer exists. There will usually be a SIMILAR charity that is in existence and it will ask the court to modify the T and sub it as the B of the T

Question 28

Specific or General Intent | for Cy Pres Doctrine

Answer 28

Court will analyze whether the T has a specific intent to help ONE charity OR a GENERAL intent to help charity. If there's SPECIFIC intent, the court may NOT modify the trust; the trust will be TERMINATED and become a resulting trust If there's a GENERAL intent, the court will sub a similar charity.

Question 29

Specific or General Intent | for a charity

Answer 29

TIP: analyze whether the Tor intended for the T to only benefit ONE specific charity (like a specific retirement home) OR if the Tor intended to GENERALLY benefit charity (all retirement homes) If something fails as a charitable trust, it may be viewed as an honorary trust.

Question 30

Remedial Trusts--Resulting Trust

Answer 30

If a T FAILS in some way or when there is an INCOMPLETE disposition of T property, a court may create a RESULTING TRUST requiring the holder of the PROPERTY TO RETURN it to the settlor or to the settlor's estate.