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87 Cards in this Set

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The Definition of a trust:
A fiduciary relationship with respect to property, subjecting the person by whom legal title is held, to equitable duties to deal w/the property for the benefit of another, which arises from the manifestation of an intent to create it.
A in the example: A ->T, Income to B, remainder to C:
Also called Grantor, Trustor, Settlor
The Trust Property is also called:
The Corpus, Body, or Res
B in the example: A->T, income to B, remainder to C, is called:
The Beneficiary (in this case, he is the income beneficiary)
UPIA stands for:
The Uniform Principal and Income Act
A →T, income to B, remainder to C: What types of interest do B &C have?
B has a present, vested interest.
C has a future, vested interest.
What type of interest do C & D have?

A→T, income to B, remainder to C, if living, if not, to D.
Future, contingent interest.
Rule against Perpetuities: Define:
No interest shall be considered valid unless it must vest, if it all, not later than 21 years of some life in being (+9 mos, or 10 lunar mos.)
When do you need to take a hard look at the Rule Against Perpetuities?
When the trust refers to people who are the members of a class.
Why was the Rule Against Perpetuities instituted?
Our Theory of Law intends that no single person should be able to tie up property forever.
Can the RAP ever be legally violated?
Yes. NC, and several other states allow Dynastic Trusts.
How long have trusts been in use?
~800 years
What case could the Courts of Law not hear in Common Law England?
A case based on a breach of trust.
What Court was instituted from the deficiency in the Court of Common Law?
The Court of Equity.
What is another name for the Court of Equity?
The Court of Chancery
What was the main goal of the Court of Equity?
A fair and equitable decision.
The 17 Duties of a trustee evolved from:
Cases decided in the Court of Equity.
Until very recently, Trust law was based on ___ ___ , rather than ____ ____ .
case law, statutory law
Trustee v. Executorship:
Trustee is a long term investor.

Executor is a short-term conservator (~1yr.)
Trustee v. Agent (Agency)
Trustee bound by the terms of the Trust document.

Agent bound by the directions of the Principal.
Trustee v. Bailee(Bailment)
Trustee has the power to sell.

Bailee does not have the power to sell.
Equitable Charge: Full example
Note: Equitable charges are rarely used.

Witherspoon transfers title in fee simple to Connor, with the provision that he gives Rebecca income of $108K a year.

Could Connor transfer the mill to Ashley? Yes, but she would have to take the charge to pay $108K per year.

What if Connor doesn’t pay? You can only go against the income generated by the Mill, not the property itself.

Equitable charges are rarely used.
Until the year 1535, there were only two types of trust available:
1.) Passive Trust
2.) Active Trust
What is another name for a Trust?
A "use".
Example of an Active Trust:
A→B, B is to generate income for C, remainder to D.
What is unusual about an Active Trust?
It is unusual for a Trustee to have the duty to perform.
Example of the Passive Trust:
A and his heirs, to B and his heirs for the use of A and his heirs.
In a Passive Trust what is the Trustee serving as?
A receptacle of title.
By the year 1535, 1/3 of the ____ in England, was held in ____ ____.
land, Passive Trust
4 Reasons to Hold Land in Trust: England
1.) Tax Avoidance
2.) The Mortmain Act
3.) Lawsuit Protection
4.) The Livery of Seisin (Defrauding someone)
What was the purpose of the Mortmain Act? What did it forbid?
To reduce the control that the Church of England held.

Transfer of property to the church.
In 1535, British Parliament enacted the ____ __ ____.
Statute of Uses.
What would the Statute of Uses do in the following example:

A→B, and his heirs for the use of C and his heirs.
It would execute the first use, and leave C, holding the land in fee simple.
What two things are exempt from the Statute of Uses?
1.)The statute did not apply to active uses.

2.)The statute did not apply to non-R/E transactions.
What was the device used to get around the Statute of Uses?
The "use upon a use".
What would happen in the following example, pre-1535:

A→B and his heirs for the use of C and his heirs, for the use of D and his heirs.
The second use would be ignored.
What would happen in the following example, 1535-1660:

A→B and his heirs for the use of C and his heirs, for the use of D and his heirs.
First use is executed, C holds the property outright in fee simple.
What would happen in the following example, 1660-Forward:

A→B and his heirs for the use of C and his heirs, for the use of D and his heirs.
D held rights, C would have held fbo D.
Why would the second use not be executed, in the following example:

A→B and his heirs for the use of C and his heirs, for the use of D and his heirs.
The ruling in Terrell's Case.
What was the reasoning given by the court, as to why they could not execute the second use, in Terrell's Case?
The horse has enough strength to jump the first fence, but not the second.
What is the ancestor of the modern trust?
The 'use upon a use'.
What are the 3 basic types of trust?
1.) Express Trust
2.) Resulting Trust
3.) Constructive Trust
What is an example of an Express Trust?
A→T, income to B, remainder to C

A has manifested an express intention to create the trust.
What are the 2 cases where an Express Trust must be in writing?
1.) If there is an interest in Real Estate.
2.) If there is a testamentary trust, per the Statute of Frauds.
Is an oral declaration enough to create an Express trust?
Yes.
What is one practical problem with an oral, Express Trust?
In court cases, the beneficiary of the trust would have the burden of proof. A verbal trust is not as enforceable.
What is the duty of a trustee, under a Resulting Trust?
The duty to convey title.
What happens under the following example of a Resulting Trust?

A→T , Income to B, remainder to C, if living.
In the absence of a taker in default provision, the property returns to A.
What happens under the following example of a Resulting Trust?

Witherspoon gives Gabe real estate worth $197,000 in trust. Gabe then transfers title to Jasmine.
Presuming that Witherspoon did not wish to make a gift to Jasmine, the land returns to Witherspoon.
Give me one example of a Constructive Trust:
Jones steals money from Spoon.

Jones holds the property via a Constructive trust in Spoon’s favor. This is how we get the property back to Spoon
What is the purpose of Resulting and Constructive Trusts?
They exist to prevent unjust enrichment.
Does the Creator of the Trust need capacity?
Yes, but you do not need a court's judgment on competence in order for the trust to be valid.
What are two methods of creating an Express Trust?
1.) By Transfer
2.) By Declaration
Can you create a trust, without the formal use of a trust document? If so, how?
Yes. Through the use of a will.
If you are using a will to create a trust, what kind of language should not be used?
Precatory language.

e.g. It is my hope, wish, eternal desire.
If you are using a will to create a trust, what kind of language should be used?
Mandatory language.

e.g. Shall be, clear direction, binding command.

Ensures a manifestation of intention.
Give me one example of a Totten Trust?
Witherspoon opens a bank account, and signs the signature card “ Witherspoon as trustee for the benefit of Spencer”
What are 4 things that a Totten Trust can be considered? Which of these is it most likely to be?
1.) A division of property (joint account)
2.) An attempted testamentary disposition.
3.) An irrevocable trust.
4.) A revocable trust.

It is most likely to be #4, a revocable trust.
How could Witherspoon revoke the Totten Trust he started by opening a bank account, and signing the signature card “ Witherspoon as trustee for the benefit of Spencer”?
Withdraw all the money from the account.
When does a Bailment begin and end?
A bailment can only be instituted with personal property.

A bailment terminates on the demand or return of the property.
Things you should know about Executorship:
Witherspoon dies, leaving everything to Burt.

-Title would have vested upon the death of Witherspoon.
-As of the instant, Gary as executor receives letters testamentary, personal property is titled to Gary.
-Personal property would be the only things available to satisfy Witherspoon’s creditors.
-If the personal property did not meet all of the creditors’ demands, Gary could apply to the court to have the real property transferred to his name, to satisfy the creditors.
What governs how long a creditor has to submit a claim?
The statute of limitations.
Who does the Doctrine of Laches apply to?
Trustees and Executors.
What does the Doctrine of Laches state:
You have a reasonable amount of time from the date you discover a breach to ask for remedy.
Under the following example, will the $1.2M be included in the Gross Estate? Who does Jeremy hold the money for?

Witherspoon leaves $27,000 to Burt. Jeremy is executor.

Jasmine kills Witherspoon. Jeremy brings wrongful death suit against Jasmine. Jeremy collects $1.2M in the suit.
Jeremy now holds $1.2M for Witherspoon’s closest heir by blood.

Is the $1.2M included in the Gross Estate?
No. It was owned after Witherspoon’s death.
A Guardian takes possession of property, but not _____.
Title to the property.
A Guardian cannot bring suit in his ___ ____. He must bring suit in the ___ _ ___ ____.
own name, the name of the ward
A Trustee has __ duties. A Guardian's duties are dictated by_____ ___.
17, statutory law
If you have an ____, the Principal holds ____ ____.
Agency, legal title
Does the trust terminate on the death of the trustee?
Does the Agency terminate on the death of the principal or Agent?
No, Yes.
When was the Statute of Frauds enacted?
1677
The Statute of Frauds is not____ __ ____.
Limited in scope.
The Statute of Frauds states that if the trust includes an interest in land it must be...
evidenced by a right.
Statute of Frauds: The trust begins by holding stock, then sell it and buys Real Estate?

Does this trust need to be evidenced by a right?
No.

*The key is what you start out holding, not what you eventually hold. If the trust had started out holding stock, and later bought real estate, this would not have to be evidenced by a right.
What are the two types of states, with regard to the Statute of Frauds?
1.) Section 7 states.

2.) Non-Section 7 States.
What are the 4 reasons you can protest, under the Statute of Frauds, in a Section 7 state?
1.) The trustee engaged in fraud.
- Constructive trust in favor of A.
2.) T is in a confidential relationship with A.
3.) Transfer was made in contemplation of death.
4.) Conveyance made in trust, but no beneficiary named. (Resulting trust in favor of A.)
Example: A→Spencer, fbo of Antonio (oral trust) - Spencer suddenly forgets that A intended a trust. What is the one way Antonio can get the land intended?
If you can prove the “Part Performance Doctrine”, Antonio takes possession of the land,
and makes a valuable improvement.

Antonio can then make an argument, that because Spencer allowed Antonio to take possession, & made a valuable improvement, that it should be Antonio’s, regardless of whether it was written down.
In a non-Section 7 State, what would Antonio need to prove an oral trust was intended:

A→RESpencer, fbo Antonio
The burden of proof is on Antonio, needs clear story & convincing evidence that the trust was intended on, or before the delivery of the deed.
What are the cases in which A has rights, in both Section 7 and non-Section 7 states?
1.) The trustee uses fraud
2.) The trustee is in a confidential relationship with A
3.) There is an oral mortgage.
Give me an example of an oral mortgage?
Witherspoon receives $200k from Spencer, 5 yrs. @ 6% interest.

Witherspoon should sign a promissory note and mortgage.

Instead of signing a mortgage, Spoon signs the deed in fee simple. Spoon makes the statement “I am letting you hold onto this, until the loan is repaid.”
If the trust agreement should be in writing, what should you be able to identify in writing?
1.) Creator
2.) Trustee
3.) Beneficiary
4.) Property
5.) Terms
Where must the trust or powers of an executor be mentioned, or by what methods?
1.) From the will
2.) The doctrine of incorporation by reference
3.) By doctrine of facts of independent significance
Doctrine of incorporation by reference:
Attempting to incorporate the language of the trust by making reference to it in the will.
Under the doctrine of incorporation by reference, the document referenced...
must be in existence before the will is signed.
What is a Codicil?
The amendment to a will.
Doctrine of Facts of Independent Significance
Assume the will says “ Everything to Bank of America, fbo my Children”

Did extrinsic evidence have legal significance separate and apart from controlling the disposition of property? Yes.

Do most people have children for a reason other than controlling the disposition of property? Yes.

Can you use the evidence to fill in the missing evidence?

What if the will says “I bequeath all property in trust to those people who will be named in a memorandum by me, at a later date.”?

Does the memo have any significance other than the disposition of property? No.

In this case, Witherspoon dies essentially intestate.
Do you have to have delivery of a trust document for a trust to come into being? If so, how?
There has to be a manifestation of intention to create, and physical delivery, or orally transmitting that you have signed the trust.