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100 Cards in this Set

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EXPRESS PRIVATE TRUSTS (CHARACTERISTICS):

What are the elements of a trust?
EXPRESS PRIVATE TRUSTS (CHARACTERISTICS):

(1) intent to create a trust

(2) trustee (inter vivos trusts only)

(3) Trust property (res)

(4) Definite beneficiaries

(5) Valid trust purpose
EXPRESS PRIVATE TRUST (INTENT):

What are the requirements for the settlor's intent?
(1) Externally manifested (writing, condut, orally).

(2) Manifested at the time of the settlor owned the property and prior to conveyance to another.

(3) Intent must have been that the trust take effect immediately.
EXPRESS PRIVATE TRUST (CHARACTERISTICS):

Is consideration required to create a trust?
No.
EXPRESS PRIVATE TRUSTS (INTENT):

Is an oral trust of personal property valid?
Yes.
One word.
EXPRESS PRIVATE TRUSTS (INTENT):

(1) What is precatory language?

(2) How is it overcome?
(1) A settlor's expression of hope, wish, or mere suggestion that property be used in a certain way.

(2) It is overcome by:
-Definite and precise directions
-Directions addressed to the fiduciary
-A resulting unnatural disposition of trust property
-Extrinsic evidence showing the setllor previously supported the intended beneficiary.
EXPRESS PRIVATE TRUSTS (TRUSTEE):

(1) Once a trust is established, will a trust fail before the trustee dies, accepts appointment, or resigns?

(2) What will happen?

(3) What is the exception?
(1) No

(2) The court will appoint a successor trustee.

(3) Unless it is clear the settlor intended to trust to continue only so long as a particular trustee served.
MISCELLANOUS (PASSIVE TRUST):

(1) What is a passive trust?

(2) What is the legal effect?
MISCELLANEOUS (PASSIVE TRUST):

(1) The trustee has no duties.

(2) Beneficiaries take legal title and the trust is void.
All one word.
EXPRESS PRIVATE TRUSTS (TRUSTEE):

(1) Who may serve as a trustee?

(2) Who does this exclude?
(1) Anyone who has capacity to acquire and hold property for his own benefit.

(2) Minors and the insane.
EXPRESS PRIVATE TRUSTS (TRUSTEE):

On what grounds can a court remove or refuse to confirm a trustee?
EXPRESS PRIVATE TRUST (TRUSTEE):

-Serious breach of trust
-Old age
-Habitual drunkness
- Conflict of interest
EXPRESS PRIVATE TRUST (TRUSTEE):

Before acceptance, on what grounds can a trustee can disclaim or refuse appointment?
EXPRESS PRIVATE TRUST (TRUSTEE):

Any.
EXPRESS PRIVAET TURSTS (TRUSTEE):

After accceptance, how may a trustee resign?
EXPRESS PRIVATE TRUSTS (TRUSTEE):

(1) court permission; or
(2) consent of all the beneficiaries;
(3) provisio in the trust.
EXPRESS PRIVATE TRUSTS (TRUSTEE):

What happens where the sole trustee is also the sole beneficiary?
EXPRESS PRIVATE TRUSTS (TRUSTEE):

Titles merge and the trust terminates.
EXPRESS PRIVATE TRUST (RES):

(1) Can an expectancy (interest not yet in legal existence) be held in trust?

(2) Why?
EXPRESS PRIVATE TRUST (RES):

(1) No.

(2) The trust must be property that the settlor has the power to convey.
EXPRESS PRIVATE TRUST (RES):

Can unenforceable gratuitious promise be the subject of a trust?
No.
EXPRESS PRIVATE TRUST (BENEFICIARIES):

What happens if a trust fails for lack of a beneficiary?
EXPRESS PRIVATE TRUST (BENEFICIARIES):

A resulting trust in favor of the settlor or his beneficiaries will be presumed.
EXPRES PRIVATE TRUSTS (BENEFICIARIES):

(1) Who can be a beneficiary?

(2) What must the beneficiary do? How is this done?
(1) Any person capabale of taking and holding title to property.

(2) Accept the trust property. This is generally express, otherwise implied.
EXPRESS PRIVATE TRUSTS (BENEFICIARIES):

(1) Why is a lawyer designated by the trust instrument not a beneficiary?

(2) Is notice to a beneficiary of a trust required?

(3) When must acceptance by beneficiary occur?
(1) A trust must operate directly to benefit the person.

(2) No.

(3) After the trust is created.
EXPRESS PRIVATE TRUSTS (BENEFICIARY):
(1) What can a beneficiary do he does not want the trust property?
EXPRESS PRIVATE TRUSTS (BENEFICIARY):

Renounce his rights within a reasonable period of time.
EXPRESS PRIVATE TRUSTS (BENEFICIARIES):

Beneficiaries must be ascertainable when?
When their interests come into enjoyment.
EXPRESS PRIVATE TRUSTS (BENEFICIARIES):

(1) What condition exists on trusts for the benefit of a class?

(2) What does this allow?
(1) The class must be reasonably definite.

(2) This allows trustee to exercise his discretion in selecting members to be benefited.
EXPRESS PRIVATE TRUSTS (BENEFICIARIES):

Where a trustee's power to choose beneficiaries is broad, what may it constitute?
A gift or a power of appointment.
Two things.
EXPRESS PRIVATE TRUSTS (PURPOSE):

(1) When is a trust purpose invalid?

(2) What happens if there is a condition on an interest that is against public policy?
EXPRESS PRIVATE TRUSTS (PURPOSE):

(1)
-Illegal
-Requires criminal or tortious act; or
- Otherwise contrary to public policy.

(2)
-Settlor's alternative desire controls, if expressed.

-If illegal condition is subequent, trust is valid and condition is invalidated.

-If illegal condition is precedent, the preferred view is to hold the interest valid unless there is evidence the settlor's wish was to void the beneficiaries' interest altogether if the condition is unenforceable.
EXPRESS PRIVATE TRUST (CREATION):

How is an express trust created?
EXPRESS TRUST (CREATION):

(1) inter vivos transfer
(2) inter vivos declaration
(3) will
3 ways.
EXPRESS TRUST(INTER VIVOS CREATION):

(1) What is required for inter vivos declaration?

(2) What is required for an inter vivos transfer?
EXPRESS TRUST(INTER VIVOS CREATION):

(1) A person declaring himself trustee for another; or

(2) Physical transfer of the property to another as a trustee.
EXPRESS TRUST (INTER VIVOS INTENT):

What may evidence lack of present intent?
EXPRESS TRUST (INTER VIVOS INTENT):

Failure to name a trustee or a promise to name a trustee in the future.
EXPRESS TRUST (INTER VIVOS RES):

What happens if a present trust is not established because there is no trust trust res?
EXPRESS TRUST (INTER VIVOS RES):

The trust arises when the settlor acquires the property and remanifests intent.
EXPRESS TRUST (INTER VIVOS CREATION):

(1) Must there be a writing for a trust of personal property?

(2) What is the exception?

(3) Is there an exception to the exception?
EXPRESS TRUST (INTER VIVOS CREATION):


(1) In most states, no.

(2) A trust of land requires a writing signed by the person entitled to impress the trust upon the land.

(3) An otherwise invalid oral trsut of land, may be enforced by imposing a constructive trust.
EXPRESS PRIVATE TRUST (INTER VIVOS CREATION - PAROL EVIDENCE):

If ambiguity appears on the face on a written trust of land, do states permit extrinsic evidence?
EXPRESS PRIVATE TRUST (INTER VIVOS CREATION - PAROL EVIDENCE):

Yes. Parol evidence is not a bar.
EXPRESS PRIVATE TRUST (INTER VIVOS INTENT):

(1) What evidences intent in an intervivos declaration?

(2) What evidences intent in an inter vivos transfer?
EXPRESS PRIVATE TRUST (INTER VIVOS INTENT):

(1) The words (declaring oneself trustee).

(2) Conduct (delivery)
(1): two words
(2): one word
EXPRESS PRIVATE TRUST (WILL CREATION):

How is a trust created by will?
EXPRESS PRIVATE TRUST (WILL CREATION):

Trust intent and essential terms must be ascertained from:
-the will
-a writing incorporated by reference into the will
-facts having independent legal signifigance
-exercise of the power of appointment
EXPRESS PRIVATE TRUST (WILL CREATION -EXAMPLES):

What types of trusts are secret and semi-secret trusts?
EXPRESS PRIVATE TRUST (WILL CREATION - EXAMPLES):

Testamentary trusts
EXPRESS PRIVATE TRUST (WILL CREATION - SECRET TRUST EX.):

(1) What is a secret trust?

(2) If the intended beneficiary does not receive the gift, what happens?

(3) What happens if the promise was made after the will was executed?
EXPRESS PRIVATE TRUST (WILL CREATION-SECRET TRUST EX.):

(1) A will that makes an absolute gift on its face, but the gift was in reliance on the beneficiary's promise to hold the property in trust for another.

(2) Present extrinsic evidence of the promise. If promise is proven by clear + convincing evidence, a constructive trust is imposed in their favor.

(3) A constructive trust may still be imposed.
EXPRESS PRIVATE TRUST (WILL CREATION - SEMI SECRET TRUST EX):

(1) What is a semi-secret trust?

(2) What is the result of this trust?
EXPRESS PRIVATE TRUST (WILL CREATION- SEMI SECRET TRUST EX):

(1) Trust makes a gift but fails to name a beneficiary.

(2)The gift fails + the named trustee holds the property on resulting trust for the testator's heirs.
CHARITABLE TRUSTS (CHARACTERISTICS):

What are the characteristics of charitable trusts?
CHARITABLE TRUSTS (CHARACTERISTICS):


Indefinite beneficiaries + a purpose considered to benefit the public.
CHARITABLE TRUSTS (LONGEVITY + ENFORCEMENT):

(1)How long may a charitable trust last?

(2) Who has the duty of enforcement?
CHARITABLE TRUSTS (LONGEVITY + ENFORCEMENT):


(1) A charitable trust may be perpetual. RAP does not apply.

(2) The state AG.
CHARITABLE TRUSTS (CY PRES):


What happends when a charitable purpose by the settlor is impracticable?
CHARITABLE TRUSTS (CY PRES):

The court will select an alternative purpose that comes as near as possible to the general charitable intent of the settlor.
TRUSTS (GENERALLY):

What are the different types of trusts?
TRUSTS (GENERALLY):

(1) express
(2) passive
(3) charitable
(4) honorary
(5) resulting
(6) constructive
(7) revocable
(8) life insurance
extra cell
extra cell
HONORARY TRUSTS:

(1) What are honorary trusts?

(2) When are they upheld?

(3) What happens if trustee no longer performs?
HONORARY TRUSTS:

(1) Trusts established for the benefit of pets or maintenance of burial places. Trustsee is "on her honor" to perform her duties.

(2) Trustee willing to perform the duties.

(3)Resulting trust is imposed.
BENEFICIARIES (VOLUNTARY ALIENATION):

(1) What is the rule on beneficiaries' transfer of interests?

(2) What happens to all previous conditions and limitations?
BENEFICIARIES (VOLUNTARY ALIENATION):

(1) Absent restrictions by statute or by the trust instrument, beneficiaries may freely transfer their interest.

(2) The transfer remains subject to all previous conditions and limitations.
BENEFICIARIES (INVOLUNTARY ALIENATION):

(1) May an insolvent trust beneficiaries' creditors levy against his beneficial interest?

(3) What may a court do to avoid judicial sale of the interest?
BENEFICIARIES (INVOLUNTARY ALIENATION):

(1) Yes.The interest is also subject to judicial sale.

(2) A order the trustee to pay the beneficiary's income to the creditors until the debt is satisfied.
BENEFICIARIES (RESTRAINTS ON ALIENATION):

Describe a spendthrift trust.
BENEFICIARIES (RESTRAINTS ON ALIENATION):

A spendthrift trust is one in which the beneficiary is unable to voluntarily or involuntarily transfer his interest in the trust. He cannot sell or give away his rights to future income or capital, and his creditors are unable to collect or attach such rights.
BENEFICIARIES (DISCRETIONARY TRUSTS):

(1) What is a discretionary trust?

(2) What is the exception?

(3) How did this effect creditors of the beneficiary?
BENEFICIARIES (DISCRETIONARY TRUSTS):

Where a trustee is given discretion whether to withold or apply payments to the beneficiary.

(2) A court will intervene if the trustee abuses this discertion.

(3)They can only take if the trustee exercises his discretion to pay, unless the interest is also protected by a spendthrift provision.
BENEFICIARIES (RESTRAINTS ON ALIENATION):

What exceptions exist to a spendthrift clause, to allow creditors to reach trust intrest before it is paid out to the beneficiary?
BENEFICIARIES (RESTRAINTS ON ALIENATION):

(1) Special classes of creditors (dependents, furnishers of necessities).

(2) Settlor is the beneficiary.
SUPPORT TRUSTS:

Define a support trust.
SUPPORT TRUSTS:

A trust that directs the trustee to pay only so much of income or principal as is necessary for the beneficiary's support. The interest of the beneficiary cannot be assigned or reached by creditors. The settlor's intent determines whether the beneficiary's other resources should be considered in determining the amount to pay him.
MODIFICATION & TERMINATION (SETTLOR):

Describe the power of the settlor to revoke or modify the trust.
MODIFICATION & TERMINATION(SETTLOR):

In most states, a settlor may not revoke or amend a trust unless he has expressly reserved that right.
MODIFICATION & TERMINATION (BENEFICIARIES):

Describe the power of beneficiaries to modify or terminate a trust.
MODIFICATION & TERMINATION (BENEFICIARIES):

Beneficiaries may compel modification or termination when all consent, AND the modiciation or termination will not frustate any material trust purpose.
MODIFICATION & TERMINATION (OBJECTIONS):

Describe the impact of settlor's objections on the beneficiaries' right to terminate.
MODIFICATION & TERMINATION (OBJECTIONS):


If all beneficiaries consent, the settlor's objects are not a bar.

However, the objections may be evidence that termination will defeat trust purpose.

Joinder of the settlor will be deemed a waiver of a material purpose that would otherwise block termination.
MODIFICATION & TERMINATION (TRUSTEE):

Describe the power of the trustee to terminate the trust.
MODIFICATION & TERMINATION (TRUSTEE):

A trustee has no power to terminate the trust except as provided in the trust instrument. However, the power to invade the trust principal may be sufficiently broad as to terminate the trust purpose.
MODIFICATION & TERMINATION:

State when a trust ordinarily terminates.
When the trust purpose is accomplished.
MODIFICATION & TERMINATION (COURT):

(1) Describe the court's power to terminate a trust.

(2) Describe the doctrine of changed circumstances.
MODIFICATION & TERMINATION (COURT):

(1) A court may prematurely terminate the trust where the purpose has become impossible, illegal, or impracticable.

(2)A court may authroize deviation from the administrative terms of the trust, upon a change in circumstances not anticipated by the settlor, where necessary to achieve the trust purpose. The changes may not deprive the beneficiarires of their interests in the income or corpus.
POWERS OF THE TRUSTEE:

State the powers and sources of the trustee.
POWERS OF THE TRUSTEE:

A trustee has those powers EXPRESSLY conferred by the trust instrument, state law, and court decress plus all powers IMPLIED as are necessary or appropriate to accomplish the trust purpose.
POWERS OF THE TRUSTEE (JOINT):

(1) Under traditional view, how must joint trustees exercise their power?

(2) Under today's view?
POWERS OF THE TRUSTEE (JOINT):

Under the traditional view, joint trustees must exercise their power by unanimous agreement. Today, in nearly half the states, any power vested in 3+ trustees may be exercised by a MAJORITY of them.
POWERS OF THE TRUSTEE (IMPERATIVE/DISCRETIONARY):

(1) Define imperative powers.

(2) Define discretionary powers.

(3) State the type of judicial review over each.
POWERS OF THE TRUSTEE (IMPERATIVE/DISCRETIONARY):

(1) Imperative powers are those powers that must be exercised by the trustee to operate the trust.

(2) Discretionary powers are those powers that may be exerised by the trustee.

(3) Both are subject to judicial review for abuse of discretion.
DUTIES OF THE TRUSTEE (STANDARD OF CARE):

State the standard of care required of a trustee.
DUTIES OF THE TRUSTEE (STANDARD OF CARE):

That degree of care, skill, and caution that would be exercised by a reasonably prudent person in MANAGING HER OWN PROPERTY. If the trustee has grater skill, she will be held to higher standard.
DUTIES OF THE TRUSTEE (DUTY OF LOYALTY):

State the trustee's duty of loyaly.
DUTIES OF THE TRUSTEE (DUTY OF LOYALTY):

Absent court approval or express waiver in the trust instrument, a trustee cannot enter into any transation in which she is dealing with the trust in her individual capacity.
DUTIES OF THE TRUSTEE (DUTY OF LOYALTY):

Who else, other than the trustee, does the prohibition against self-dealing apply to?
DUTIES OF THE TRUSTEE (DUTY OF LOYALTY):

The trustee's relatives, business associates, and corporations to which the trustee is a director, officer, or principal shareholder.
DUTIES OF THE TRUSTEE (KEEP ACCOUNT):

State the trustee's duty to keep account.
DUTIES OF THE TRUSTEE (KEEP ACCOUNT):

To keep and render accounts ensures that the trustee is meeting his obligation of loyalty.
DUTIES OF THE TRUSTEE (BREACH-REMEDIES):

State the remedies available to the beneficiaries if the trustee breaches his duties.
DUTIES OF THE TRUSTEE (BREACH-REMEDIES):

(1) Set aside the transaction.

(2) Recover any profits made by the trustee.

(3) Affirm the transaction.
DUTIES OF THE TRUSTEE (TO SEPARATE & EARMARK):

(1) State the trustee's duty to separate and earmark trust property.

(2) State consequences for change in value of the commingled property.
DUTIES OF THE TRUSTEE (TO SEPARATE & EARMARK):

(1) A trustee must keep trust assets physically separate from other assets.

(2) If the trustee commingles trust assets with her own and some of the property is lost or destroyed, it is presumed that the property lost was the trustee's and the property still on hand belongs to the trust.

Also, if a portion of the commingled assets increase in value and portion of the commingled assets decreases in value, it is preumed that it was the trustee's assets that decreased in value and the trust's assets that increased in value.
DUTIES OF THE TRUSTEE (PERFORM LOYALLY):

(1) State the trustee's duty to perform loyally.

(2) State this rule as relates to Investment and Management Decisions

(3) State consequences of a breach.
DUTIES OF THE TRUSTEE (PERFORM LOYALLY):

(1) A trustee may only delegate acts that would be unreasonable to require her to perform personally, she may never delegate the entire administration of the trust.

(2) Under the Uniform Prudent Investor Act, a trustee may delegate investment and management functions that a prudent trustee of comparable skills could properly delegate under the circumstances.

(3) If a trustee improperly limits or surrenders her conrol, she becomes a guarantor of the fund and is responsbile fo ractual losses, no matter what he cause of the loss.
DUTIES OF THE TRUSTEE (DEFEND):

Describe the trustee's duty to defend the trust from attack.
DUTIES OF THE TRUSTEE (DEFEND):

A trustee owes a duty to defend the trust from legal attack unless examination reveals challenge is well-founded.
DUTIES OF TRUSTEE (PRESERVE + PRODUCTIVE):

(1) State trustee's duty to preserve trust property and to make it productive.

(2) State consequences for breach.
DUTIES OF TRUSTEE (PRESERVE + PRODUCTIVE):

(1) The power to invest is normally implied from theduty to make trust property productive.

(2) The damages is the amount of income that would normally accrue from proper investments.
INVESTMENTS:

(1) What governs a trustee's investment responsibilities?

(2) What governs without a provision in the trust instrument?
INVESTMENTS:

(1) Trust instrument.

(2) A trustee's investment responsibilites are governed by either the Uniform Prudent Investor Act or statutory legal lists.
INVESTMENTS:

(1) What is the standard in a prudent investor jurisdiction?

(2) What is the standard in a legal list jurisdiction?
INVESTMENTS:

(1) Only prudent investments are permissible regardless of the trusts terms.

(2) Trust langauge giving the trustee broad discretion is likely to free the trustee from the list and permit investment similiar to that under the prudent investor rule.
INVESTMENTS (UPIA):

(1) Under the UPIA, what is the standard of care?

(2) What are the trustee's duties re loyalty + impartiality?

(3) How is the trustee's prudence evaluated?

(4) What types of investments are permitted?

(5) What is the trustee's duty re diversification?

(6) How is the trustee's compliance ascertained?

(7) To what extent may a trustee delegate?
(1)The trustee must exercise reasonale care, skill, and caution when investing and managing trust assets. A trustee with special skills, or who has represented herself having such knowlege, has a duty to use such skills or expertise.

(2)Under the UPIA, a trustee must act exclusively for the beneficiary when investing and managing trust assets.

(3)Investment decisions must be evaluated in the context of the entire turst portfolio and as part of an overall investment strategy.

(4) A trustee may invest in any kind of property or any type of investment, provided she acts prudently.

(5) A trustee must diversify the trust unlss she reasonably determines that the purposes of the trust are better served w/o diversification.

(6)Compliance with the UPIA is determined in light of the facts and circumstances at the time of the trustee's decision or action.

(8)A trustee may delegate investment + mgmt functions but must act prudently in selecting the agent, est. the scope and terms of the delegation, and periodicially reviewing the agents action
INVESTMENT (STATUTORY LEGAL LIST):

(1) What are statutory legal lists?

(2) How must a trustee follow the list?

(3) State what are generally improper investments?
INVESTMENT (STATUTORY LEGAL LIST):


(1) Lists that sets forth approved investments for trust asssets. If the list is permissive, the trustee may invest outside of the list. If the list is mandatory, the trustee commits a breach if she invests outside the list.

(2)Not blindly. She must exercise reasonable care, skill, and cauiton in investing while taking into account all relevant circumstances.

(3) Unsecured loans + mortagages, corporate stocks, and unproductive land.
FUTURE TRUSTS (CREATION):

State the rule re creation of future trusts.
FUTURE TRUSTS (CREATION):

When a settlor promises to create a trust in the future and that promise is supported by valid consideration, a trust can arise in the future, when the property is acquired, without any further manifestation of intent.
LIABILITES OF A TRUSTEE (BENEFICIARIES):

State the rule re when beneficiaries may seek removal of a trustee.
LIABILITES OF A TRUSTEE (BENEFICIARIES):

Beneficiaries may seek damges or removal of the trustee for breach of duty and benefitting from the breach.
LIABILITIES OF TRUSTEES (OFFSET):

What is the rule re offsetting breach?
LIABILITIES OF TRUSTEES (OFFSET):

A trustee is not permitted to offset loss from one breach by gain that resulted from another breach.
LIABILITY OF TRUSTEE (ACTS OF OTHERS):

State the rule re trustee's liability for the acts of agent, predecessor, or co-trustee.
LIABILITY OF TRUSTEE (ACTS OF OTHERS):

A trustee can be held liable for the acts of her agents, co-trustees, or predecessor trustees if she directed, participated, or failed to redress the wrong.
LIABILTY OF TRUSTEE (EXCLUPATORY CLAUSE):

(1) What is an exculpatory clause?

(2) How is it construed?
LIABILTY OF TRUSTEE (EXCLUPATORY CLAUSE):

(1) A clause that releives a trustee of liability for breach of duty.

(2) These are strictly construed and enforceable where no bad faith, intentional breach, or recklessness is involved. They are void if they absolve the trustee of all liability.
TRUSTEE'S LIABILITY (THIRD PARTIES):

(1)State when a trustee is personally liable on a contract.

(2) State when a trustee is personally liable on a tort.
TRUSTEE'S LIABILITY (THIRD PARTIES):

(1) A trustee is personally liable to third parties on cotnracts made in the course of the trust administration, unless the contract states otherwise. The trustee is entitled to indemnification from the trust if the contract was within her powers and she acted with reasonable prudence.

(2) A trustee is personally liable for torts committed in the course of the trust adminsitration, including those comitted by the trustee's agent. There is indemnifidation if the trustee was not personally at fault or the tort occurred as a normal indident to activity in which the trusee was properly engaged.
LIABILITY OF THIRD PARTIES TO THE TRUST (IMPROPER TRANSFERS TO THIRD PARTIES):

State the ability of beneficiary to set aside improperly transferred property.
LIABILITY OF THIRD PARTIES TO THE TRUST(IMPROPER TRANSFERS TO THIRD PARTIES):

A beneficiary or successor to the trustee can set aside transactions that are breaches of the trust if the property is not in the hands of a BFP.

a BFP cuts off the beneficiaries' equitable interests. A party is a BFP if he acquires the property for value without notice of the trust.
LIABILITY OF THIRD PARTIES TO THE TRUST (DIRECT SUIT BY BENEFICIARIES):

(1) State the rule re direct suits by beneiciaries against third parties who damage trust property.

(2) State the exception.
(LIABILITY OF THIRD PARTIES TO THE TRUST (DIRECT SUIT BY BENEFICIARIES):

(1) Beneficaries cannot engage in direct suits against third parties who damage trust property; the trustee alone can sue. The beneficiaries' remedy is to bring suit IN EQUITY to compel the trustee to sue the third party.

(2) Direct actions are permitted where: (i) trustee participated in the breach; (i) tustee has left the jurisdiction and there is no successor trustee appointed; (iii) the trustee fails to sue a third person liable in tort or contact.
ALLOCATION OF RECEIPTS & EXPENSES BETWEEN INCOME + PRINCIPAL ACCOUNTS:

Define the UPIA.
ALLOCATION OF RECEIPTS & EXPENSES BETWEEN INCOME + PRINCIPAL ACCOUNTS:

The UPIA is the Uniform Principal & Income Act. The Act applies to all trusts and estates in a majority of states, unless the trust instrumetns says otherwise. It gives the trustee or personal rep adjustment power to reallocate investment portfolio return. This allows the trustee to characterize items as capital gain, stoc dividends, etc. as income if the trustee deems it appropriate or necessary to carry out the trust purpose.
ALLOCATION OF RECEIPTS & EXPENSES BETWEEN INCOME + PRINCIPAL ACCOUNTS (DUTY OF FAIRNESS):

(1) State the duty of fairness.

(2) State has this relates to the allocation power.
ALLOCATION OF RECEIPTS & EXPENSES BETWEEN INCOME + PRINCIPAL ACCOUNTS (DUTY OF FAIRNESS):

(1) A trustee has a duty to administer the trust impartially, except to that extent that the trust or will manifests an intent that one or more of the beneficiaries is to be favored over the others.

(2) If the trustee determines that by distributing only the trust's income she is unable to comply with the requirement that all beneficiaries be treated fairly, she may adjust between principal and income to the extent necessary.
ALLOCATION OF RECEIPTS & EXPENSES BETWEEN INCOME + PRINCIPAL ACCOUNTS:

State the traditional accounting rules.
ALLOCATION OF RECEIPTS & EXPENSES BETWEEN INCOME + PRINCIPAL ACCOUNTS:

Net rental income is income and the proceeds from the sale of trust asset are principal
ALLOCATION OF RECEIPTS & EXPENSES BETWEEN INCOME + PRINCIPAL ACCOUNTS:

State what is treated as income.
ALLOCATION OF RECEIPTS & EXPENSES BETWEEN INCOME + PRINCIPAL ACCOUNTS:

-Cash divididends
- Receipts from use or investment of trust property (e.g. rents, interests)
-10% of payment from a deferred compensation plan (e.g. pension plan)
-10% of proceeds received as a royalty or bonus from a working interest (e.g. patents)
-Proceeds from contract ensuring trustee against loss.
ALLOCATION OF RECEIPTS & EXPENSES BETWEEN INCOME + PRINCIPAL ACCOUNTS:


State what is treated as principal.
ALLOCATION OF RECEIPTS & EXPENSES BETWEEN INCOME + PRINCIPAL ACCOUNTS:

-Stock dividends
-Extraordinary receipts (receipts from sale of trust assets)
-Proceds from life insurance policy naming trust or trustee as a beneficiary
-90% of proceeds from a royalty or bonus from a workig interest
-90% of payment from a deferred compensation program
ALLOCATION OF RECEIPTS & EXPENSES BETWEEN INCOME + PRINCIPAL ACCOUNTS:


State the rule for treatment of dividiends payable by the issuer either in cash or stock at the option of the trustee.
ALLOCATION OF RECEIPTS & EXPENSES BETWEEN INCOME + PRINCIPAL ACCOUNTS:

If dividends are payable by the issuer either as stock or cash, they are treated as cash dividends and allocated to trust income.
WILL SUBSTITUTES:

State the test for distinguishing a trust from a will.
WILL SUBSTITUTES :

If the transfer creates a present gift, then it is a trust.
WILL SUBSTITUTES (REVOCABLE INTER VIVOS TRUSTS):

Define a revocable trust. State why it is valid.
WILL SUBSTITUTES (REVOCABLE INTER VIVOS TRUSTS):

A present gift of trust that is subject to future divestment. The interest passess to the beneficiary during the settlor's lifetime, it merely becomes posessory on the settlor's death.
WILL SUBSTITUTES (REVOCABLE INTER VIVOS TRUSTS):

(1) Describe a pour-over gift from Will to Revocable Trust.

(2) State the requirements.
WILL SUBSTITUTES (REVOCABLE INTER VIVOS TRUSTS):

(1) Uniform Testamentar Additions to Trust Act, a settlor can make gifts by will to a trust established during her lifetime.

(2) The trust must have been established before or at the same time as the will, and may remain unfunded during the settlor's lifetime. The trust must be clearly identified from the language of the will.
TOTTEN TRUSTS:

(1 Describe a totten trust.

(2) State when a totten trust is revocable.

(3) State the protections vis a vis creditors.

(4) State when it terminates.
TOTTEN TRUSTS:

(1) Not a real trust. Exists when a bank account depositor declares herself trustee of the account for a person who is to receive the money in the account at the time of the depositor's death. The depositor retains full control of the money during her lifetime.

(2)
-Withdrawal of funds.
-Any lifetime act manifesting an intent to revoke.
-A specific contradictory provision in a will.

(3) It is not protected from creditor's claims.

(4) The beneficiary predeceases the depositor.
UNIFORM TRANSFERS TO MINORS ACT:

Describe the UTMA.
UNIFORM TRANSFERS TO MINORS ACT:


Allows gifts to minors who have no legal capacity to manage or sell property. Property is transferred to a person a custodian for a minor. The custodian does not hold legal title; title is in the minor, subject to the custodian's stautory power. The custodian is a fiduciary subject to standard of care of a prudent person dealing with property of another.
TRUSTS ARISING AS A MATTER OF LAW: (RESULTING TRUSTS):

State the three types.
TRUSTS ARISING AS A MATTER OF LAW (RESULTING TRUSTS):

(1) Purchase money resulting trusts.
(2) Resulting trusts arising on failure of an express trust.
(3) Resulting trusts arising from an incomplete disposition of trust property.
TRUSTS ARISING AS A MATTER OF LAW:

State the rule re the Statute of Frauds.
TRUSTS ARISING AS A MATTER OF LAW:

The statute of frauds does not apply to resulting and constructive trusts.
TRUSTS ARISING AS A MATTER OF LAW:

Describe a trust arising as a matter of law (e.g. examples, when they arise).
TRUSTS ARISING AS A MATTER OF LAW:


Resulting and constructive trusts are implied by law or imposed by courts. Resulting trusts involve reversionary interests and are based on the presumed intent of the settlor. Constructive trusts are used to prevent unjust enrichment. They arise when there is no valid express declaration of trust, or when no trust was intended.
TRUSTS ARISING AS A MATTER OF LAW (RESULTING TRUST FROM EXCESS CORPUS):

State when a resulting trust implied from excess corpus arises.
TRUSTS ARISING AS A MATTER OF LAW (RESULTING TRUST FROM EXCESS CORPUS):

When the trust purpose is fully satisfied and some trust property remains. Also, there can be a resulting trust on part of the excess corpus even before the trust is terminated if it is clear that there is excess trust corpus.
TRUSTS ARISING AS A MATTER OF LAW (RESULTING TRUST ON FAILURE OF EXPRESS TRUST):

State when a resulting trust on failure of an express trust arises.
TRUSTS ARISING AS A MATTER OF LAW (RESULTING TRUST ON FAILURE OF EXPRESS TRUST):

A settlor has conveed property to a trustee under an express trust and:
-trust is void or unenforceable; or
- beneficiary is dead or cannot be located.
TRUSTS ARISING AS A MATTER OF LAW (PURCHASE MONEY RESULTING TRUST):


Describe when a purchase money resulting trust arises.
TRUSTS ARISING AS A MATTER OF LAW (PURCHASE MONEY RESULTING TRUST):

Presumed whenever the beneficiary furnishes consideration for the acquisiton of real or personal property, but with the beneficiary's consent, title is taken in the name of the trustee.
TRUSTS ARISING AS A MATTER OF LAW (PURCHASE MONEY RESULTING TRUST):

State exceptions to a purchase money resulting trust presumption.
TRUSTS ARISING AS A MATTER OF LAW (PURCHASE MONEY RESULTING TRUST):

(1) Parties are close relatives -- a gift is presumed.

(2) Unlawful purpose.

(3) Transferee wrongfully obtained title (e.g. trustee takes title without beneficiary's consent).
TRUSTS ARISING AS A MATTER OF LAW (PURCHASE MONEY RESULTING TRUST):

Describe a pro rata resulting trust.
TRUSTS ARISING AS A MATTER OF LAW (PURCHASE MONEY RESULTING TRUST):

Where the beneficiary suplies only part of the consideration, a resulting trust in his favor is only for a pro rata portion of the property.
OBLIGATIONS OF A TRUSTEE OF A CONSRUCTIVE OR RESULTING TRUST:

State the duties of a trustee.
OBLIGATIONS OF A TRUSTEE OF A CONSRUCTIVE OR RESULTING TRUST:

Constructive and resulting trusts are passive trusts. Once the court has declarared such a trust to exist, the trustee's sole duty is to convey legal title to the beneficiary. The trustee must also account for profits taken from the property or fair rental value of his use of it from the tme of the occurancs raising the implied trust. There is not duty to invest.
APPLICATION OF EQUITABLE PRINCIPLES:

State whether equitable principles apply to trusts arising under the law (e.g. constructive and resulting).
APPLICATION OF EQUITABLE PRINCIPLES:

The rule that an adequate remedy at law bars equitable relief does not apply to constructive and resulting trusts. Except for those created from a breach of an ORAL promise to (i) make a will (constructive trust) or to hold property purchased at a foreclosure sale for the benefit of a promisee (ii).
TRUSTS ARISING AS A MATTER OF LAW: (CONSTRUCTIVE TRUSTS):

(1) Describe a constructive trust.

(2) Describe the trustee's duty.

(3) State the proof necessary.
TRUSTS ARISING AS A MATTER OF LAW: (RESULTING TRUSTS):

(1) Not a trust, but a flexible equitable remedy to prevent unjust enrichment resulting from wrongful conduct.

(2) The trustee's duty is to convey the property to the person who would have owned the property but for the wrongful conduct.

(3) Clear and convincing evidence.
TRUSTS ARISING AS A MATTER OF LAW: (CONSTRUCTIVE TRUSTS):

State the general rule re breach of a promise as relates to a constructive trust.
TRUSTS ARISING AS A MATTER OF LAW: (CONSTRUCTIVE TRUSTS):

Breach of a promise will not raise a constructive trust.
TRUSTS ARISING AS A MATTER OF LAW(CONSTRUCTIVE TRUSTS):

(1) State the exceptions to the rule re breach of a promise and constructive trust.

(2) State the standard of proof.
TRUSTS ARISING AS A MATTER OF LAW(CONSTRUCTIVE TRUSTS):

A constructive trust will arise if the following promises are breached:

- fradulent (promisor never intended to keep)

- by one in a confid relationship

- by devisee or heir to decdent to hold property for the benefit of a third person

- by debtor at a foreclosure sale to hold property causing the promisee to forgo biding

(2) Clear and conving evidence.
EXPRESS PRIVATE TRUST:

Define a trust.
EXPRES PRIVATE TRUST:

A fiduciary relationship where the trustee holds legal title to the trust property (res) subject to the enforceable rights of the beneficiary. The creator of the trust is the settlor, who must have had intent to create a trust. The trust must have a valid trust purpose.