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49 Cards in this Set
- Front
- Back
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Trusts:
What are three types of trusts? |
1) Express trusts
2) Resulting trusts 3) Constructive trusts |
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Trusts:
What are the methods of created a trust? |
1) Self-declaration of trusts; 2) transfer to third person named as trustee; 3) will (testamentary trust); 4) exercise power of appointment
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Trusts:
Is consideration required for the creation of a trust? |
No. However, consideration is req'd for a promise to create a trust in the future.
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Trusts:
To have a valid trusts, what do you need? |
A SETTLOR who DELIVERS the TRUST PROPERTY to a TRUSTEE with the INTENT TO CREATE A TRUST for the benefit of the BENEFICIARIES. Must be for a LAWFUL PURPOSE and Statute of F. may require that the trusts be in writing.
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Trusts:
What are some aspects regarding a trustee that are pertinent to his/her qualifications to serve as trustee? |
1) Must have legal capacity; 2) Cannot be compelled to serve as trustee; 3) If exercises powers or performs duties under the trusts, is presumed to have accepted trusts unless he is merely acting to preserve trusts property and sends notice of rejection; 4) no trust fails for lack of a trustee; 5) corporate trustee is not required to post a fiduciary bond, but an individual named as trustee must give bond unless the settlor waives
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Trusts:
When determining whether there was an intention to create a trusts, what is the first question you must ask? |
Is the language precatory (a non-binding suggestion) or does it impose an enforceable obligation?
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Trusts:
What are some general rules regarding the "intention to create a trust" element? |
1) precatory language = no trust; 2) ambiguous language or an expression of motive for a gift, usually not an enforceable duty; 3) no particular words necessary for creation of trust; 4) if trustee of real property has no trust powers or duties to perform, no trust is created; instead, legal title vests in the beneficiaries.
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Trusts:
Describe how a beneficiary may disclaim an interest in a trust. |
Testamentary trusts = disclaimer must be in writing and field within 9 months after testator's death; inter vivos trusts = must be in an acknowledged written instrument delivered to trustee no later than 9 months after 1) the date on which the transfer creating the interest is made, 2) the date on which the beneficiary attains 21, or 3) in the case of a future interest, the date on which the event that causes the taker of the interest to be finally ascertained and his interest indefeasibly vested.
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Trusts:
For what unlawful purposes will a trust fail? |
1) its enforcement involves the commission of a crime or tort; 2) it was created with the intent to defeat the settlor's creditors, or 3) it was based on illegal consideration.
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Trusts:
For what reasons against public policy will a trust fail? |
Total restraints on marriage and conditions that encourage divorce; and provision calling for destruction of property. Beneficiary takes the interest free of the restriction, provided that the condition is intended to compel the beneficiary to remain single and serves no reasonable purpose. (Partial restrains are valid).
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Trusts:
What is the rule on revocability of a trust? |
All inter vivos tursts are revocable and amendable by the settlor unless expressly made revocable and unammendable.
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Trusts:
A trust is valid even though the settlor retains one or more of the following interests or powers: |
1) Income for live; 2) the power to revoke, alter, or terminate the trust; 3) the power to designate the person to whom income or principal shall be paid; 4) the power to control administration of the trusts; 5) the right to exercise a power or option with respect to life insurance proceeds or employee benefits paid to the trust; or 6) the power to add property to the trust.
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Trusts:
What is a pour-over gift? |
It is a testamentary gift to the trusts by will. Such a gift is valid even if trust is subject to revocation, amendment, or modification after the will was executed.
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Trusts:
What effect does divorce have on a trust. |
It revokes all revocable trusts provisions in favor of the settlor’s former spouse, unless the trusts instrument is reexecuted or a contract or court order provides otherwise.
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Trusts:
Where a trust is revocable and amendable... |
Any revocation or amendment must be made in writing; an oral revocation, or even an amendment to an oral trusts of personal property, must be in writing. (All trusts must be in writing except oral trusts of personal property to a trustee other than the settlor or beneficiary coupled with a declaration of intent to create a trusts simultaneously with or prior to the transfer)
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Trusts:
Are unfunded revocable life insurance trusts valid? |
Yes, and pour-over gifts to these trusts are valid. Designation of “the trustee named in my will” as beneficiary of life insurance proceeds is valid. If no qualified trustee makes claim to the proceeds within 18 month after insured’s death, the proceeds are paid to the contingent beneficiary or to the insured’s estate.
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Trusts:
A right of survivorship in a joint account must be expressly stated in an agreement... |
1) signed by the party who dies, and 2) stating that the account is to “vest in and belong to the surviving party. Language that merely authorizes bank to pay funds to a survivor does not create right of survivorship (only protects bank). Extrinsic evidence is not admissible to show intent to create right of survivorship, or deny the existence of a right of survivorship if the parties’ agreement provides for one.
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Trusts:
What if a signature card for a joint bank account says, “on the death of one party, all sums in the account shall vest in and belong to the surviving party” or “with right of survivorship?” |
This would be valid if the signature card was signed by the party who has died, even if the survivor didn’t sign - - unless, the survivorship account is between husband and wife and was funded with community property, in which case, both spouses must sign.
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Trusts:
What is a durable power of attorney? |
Authorizes another person (agent, attorney-in-fact) to act on behalf of the principal, and does not terminate on the disability or incapacity of the principal. To be valid, must be in writing, signed, and acknowledged. Does not lapse due to a passing of time unless a time limitation is set out in the instrument.
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Trusts:
What are some notable rules association with a durable power of attorney? |
1) Can be a springing DPA, which becomes effective on disability or incapacity of principal; 2) 3rd parties who rely on one without actual knowledge that it has been revoked or that principal has died, are protected; 3) divorce but not bankruptcy terminate a DPA given to a spouse; 4) appointment of guardian of the estate for the principal terminates a DPA (though a DPA can be used to avoid having to have a guardian appointed.
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Trusts:
What are some rules distinctive to charitable trusts? |
1) Not subject to RAP; 2) must be a charitable purpose; 3) must be in favor of a reasonably large segment of public at large, and cannot benefit identifiable individuals (poor relatives, no, but charitable beneficiary ok); 4) when specific charitable purpose can no longer be accomplished, may be reformed in judicial proceedings under the doctrine of cy pres
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Trusts:
How is cy pres applied? |
Court will direct that the trusts property be applied to another charitable purpose that is as similar as possible to the original one, rather than permit the trusts to fail and become a resulting trust. It must first be shown that the specific charitable purpose is no longer possible or practicable and that there was a general charitable intent.
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Trusts:
Describe charitable trusts administration if the charitable beneficiary of a trusts ceases to exists or ceases to qualify as a charity for tax purposes. |
If the trusts does not provide for a successor beneficiary, the trustee is authorized, without court approval, to designate a replacement beneficiary that has the same or similar charitable purpose as the failed beneficiary. Notice of the selection of a replacement beneficiary must be sent to the state attorney general (who is the only person who can maintain an action for the enforcement of a charitable trust).
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Trusts:
What is the perpetuities reform statute? |
It has a “cy pres” style application. If a will or trusts violates RAP, the instrument shall be reformed or construed so as to carry out settlor’ general intent as far as possible within the period of the Rule.
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Trusts:
What is an honorary trusts, and what are its components? |
A noncharitable trusts created with an object as beneficiary. Not enforceable but the trustee is permitted to perform. Ex. is a trusts for the maintenance of cemetery plots
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Trusts:
What about the trusts for the care of an animal? |
If the animal is alive during the settlor’s lifetime, the trust is valid. The trust terminates when the animal dies. Excess trusts principal not needed for the animal’s care may be distributed to the settlor or her successors. The trust may be enforced by a person named in the trusts or by a person appointed by the court.
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Trusts:
What is a resulting trust and what are the three types of a resulting trust? |
Not a trust at all, so Trust Code does not apply. Based on the implied or presumed intent of the settlor rather than on any expressed intent. Resulting “trustee’s” only duty is to hold and convey the property in accordance with the demands of the party deemed to be the beneficiary. Types: Purchase money resulting trust; resulting trust upon failure of express trust; resulting trust by reversion.
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Trusts:
Describe a purchase money resulting trust. |
When one party provides the purchase price of property and title is taken in the name of another unrelated party, a PMRT is presumed. The presumption can be rebutted by showing that a gift or a loan was intended. The PMRT presumption does not arise when the grantee is an object of the purchaser’s bounty (e.g. child, spouse, or other relation). Instead, the presumption is that the purchaser intended to make a gift to the grantee.
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Trusts:
Describe a resulting trust upon failure of express trusts. |
A resulting trust that arises when an express trust fails and there is no indication of what is to be done with the trusts property.
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Trusts:
Describe a resulting trust by reversion |
A resulting trusts in favor of the settlor that arises when the trust’s purpose is fully satisfied and some trust property remains or the trust makes an incomplete disposition of the trust assets.
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Trusts:
Define constructive trust and give a short example. |
A constructive trusts is not a trust. It is an equitable remedy whose object is to disgorge unjust enrichment. Benefit of constructive trusts: Enables injured party to recover the very property in dispute; doesn't have to settle for judgment for money damages.
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Trusts:
What are the two elements of a constructive trusts? |
Wrongful conduct (murder of testator)
Unjust enrichment |
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Trusts:
When may an oral trusts of land be proved and a constructive trusts imposed? |
If the grantee's promise is proved by clear and convincing evidence and there was 1) fraud in the inducement; 2) duress or undue influence; 3) a confidential relationship between grantor and grantee.
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Trusts:
What is a secret trusts? |
Absolute gift in will made in reliance on beneficiary's promise to hold the property in trusts for another; extrinsic evidence admitted; constructive trusts imposed in favor in intended beneficiary.
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Trusts:
What is a semi-secret trusts? |
Gift in will made to a person "in trusts" but does not name trust beneficiary; extrinsic evidence not admitted; trustee holds on resulting trusts for testator's legatees or heirs.
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Trusts:
Transferability of beneficiary's interest. |
Unless it is subject to a spendthrift provision, a trust beneficiary's equitable interest is freely transferable. This makes the interest subject to claims of his judgment creditors.
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Trusts:
What is a spendthrift clause? |
Beneficiary is unable to voluntarily or involuntarily to transfer his interest in the trust. Spendthrift trusts are reachable by creditors who furnish necessaries and claimaints of child support, and are subject to federal tax liens.
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Trusts:
There is an exception to spendthrift protection if the settlor names himself as beneficiary or if the trusts is revocable by the settlor. Under what circumstances is spendthrift protection not lost? |
If a beneficiary has 1) an invasion of power limited by an ascertainable standard relating to beneficiary's health, education, maintenance or support; 2) or an inter vivos or testamentary power of appointment.
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Trusts:
Describe discretionary trusts and creditors' rights. |
A pure discretion trusts is not reachable by beneficiaries' creditors but if the discretionary trusts is in favor of the settlor, a creditor can reach the settlor's interest to the maximum extend that the trustee could make discretionary distributions for the settlor's benefit.
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Trusts:
Describe support trusts and creditors' rights. |
Beneficary can compel distribution unlike in a pure discretionary trust. Support creditors can reach a support trusts.
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Trusts:
Jurisdiction? |
District courts and statutory probate courts have concurrent jurisdiction over inter vivos, testamentary, and charitable trusts.
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Trusts:
Venue? |
If an individual trustee, 1) county of trustee's residence, or 2) county in which situs of trusts has been maintained. Two or more individual trustees: county in which situs of trusts has been maintained. Corporate trustee: county in which situs of trusts has been maintained.
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Trusts:
Accounting? |
Trusts beneficiaries are entitled to an accounting, on demand, no sooner than 12 months after trusts was created; and to successive accountings on demand at same intervals.
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Trusts:
What is the model answer for a question that asks you if a trustee can do something? |
The Texas Trusts Code, which applies to all trusts in Texas except to the extent the trustee's powers are expanded or limited by the settlor, gives broad fiduciary powers to trustee. Specifically, the Code expressly authorizes a trustee to (do whatever the question involves). Just remember if a fee simple owner can do it so can trustee. But remember exceptions.
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Trusts:
There are two situations where the answer is 'No, the trustee doesn't have the power to do this." What are they? |
self dealing; imprudent investment.
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Trusts:
Absent a contrary provision or court approval, a trustee cannot enter into any transaction in which she is dealing with the trust in an individual capacity. What are the maid prohibited self-dealing transactions. |
1) cannot buy or sell trusts assets; 2) cannot borrow trust funds or make loans to trust; 3) cannot use trust assets to secure personal loan; 4) cannot personally gain through position as trustee; 5) cannot purchase own securities as trust asset; 6) cannot sell assets from one trust to another.
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Trusts:
What are the remedies for breach of trusts? |
Court may: 1) compel the trustee to perform her duties; 2) enjoin the trustee from committing a breach of trusts; 3) compel the trustee to redress a breach of trusts; 4) order the trustee to account; 5) appoint a receiver; 6) remove or suspend the trustee; 7) reduce or deny compensation to trustee; 8) vod the trustee's act, impose a lien or a constructive trust, or trace and recover trusts property; 9) order any other appropriate relief.
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Trusts:
The SOL does not begin to run until... |
1) the trustee repudiates the trust; 2) the trustee gives an accounting that fully discloses the conduct giving rise to the cause of action; or the trust relationship comes to an end.
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Trusts:
When a prohibited transaction has taken place, the beneficiary may... |
ratify the transaction or hold the trustee personally liable.
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