Texas - Trusts

Front 1

Trusts: What are the requirements for a trust?

Back 1

Must be a settlor who delivers the trust property to a trustee, with the intent to create a trust for the benefit of beneficiaries. Must be for lawful purpose and satisfy SoF if necessary.

Front 2

Trusts: What must the settlor be?

Back 2

A person with legal capacity who intends to create a trust and makes a transfer of assets to the trustee.

Front 3

Trusts: What is the delivery requirement?

Back 3

Must be delivery of assets with the intention to create a trust. (Does not apply to will or self-declaration)

Front 4

Trusts: What are the elements of a trust (Memorize)

Back 4

1, Settlor
2. Delivery
3. Trust Property
4. Trustee (although courts will appoint if no trustee)
5. Intent
6. Ascertainable Beneficiaries
7. Valid trust purpose

Front 5

Trusts: When will an oral trust of personal property be valid despite the SoF?

Back 5

1. When it names someone other than the settlor or beneficiary as trustee, and simaltaneously (or prior) the transferor expresses the intention to create a trust.

Front 6

Trusts: Which trusts are revocable?

Back 6

All, unless expressly made irrevocable.

Front 7

Trusts: Are charitable trusts required to have identifiable beneficiaries?

Back 7

No.

Front 8

Trusts: What is an "honorary trust"?

Back 8

A trust created with an object as a beneficiary. Not enforceable, but the trustee is permitted to perform.

Front 9

Trusts: Does the trust code apply to resulting trusts (based upon implied or presumed intent) or constructive trusts?

Back 9

No.

Front 10

Trusts: May a trust beneficiary assign their equitable interest?

Back 10

Yes, unless it is a spendthrift trust.

Front 11

Trusts: What is a spendthrift clause?

Back 11

A trust in which the beneficiary is unable to voluntarily or involuntarily transfer his interest.

Front 12

Trusts: What is the exception to spendthrift protection?

Back 12

Where the settlor designates himself as beneficiary or the trust is revocable.

Front 13

Trusts: Who can reach spendthrift trusts?

Back 13

1. Creditors who furnish necessities.
2. Federal tax liens
3. Claimants of child support.

Front 14

Trusts: What can a fee owner do that a trustee may not do?

Back 14

Self-deal. Everything else is specifically authorized by the Trust Code.

Front 15

Trusts: What does the Uniform Prudent Investor Act alow a trustee to do?

Back 15

Invest in any kind of property or type of investment so long as they act prudently.

Front 16

Trusts: What are factors which should be considered when making investment decisions?

Back 16

1. General economic conditions.
2. Inflation/deflation
3. Tax consequences
4. Role of each investment within the portfolio.
5. Expected total return.
6. Other resources of benef.
7. Needs for liquidity.

Front 17

Trusts: What duty does a trustee have in regards to diversification?

Back 17

Must diversify unless rsbl determines that purposes better served without diversification.

Front 18

Trusts: How must a trustee act prudently with an agent?

Back 18

1. Selection
2. Scope and terms of delegation.
3. Periodic reviews.

Front 19

Trusts: Does a trustee have a duty to administer a trust impartially?

Back 19

Yes, unless one or more of the beneficiaries is to be favored over the others.

Front 20

Trusts: What duty does a trustee owe to the trust and its beneficiaries?

Back 20

Undivided loyalty.

Front 21

Trusts: What transactions are a trustee prohibited from making?

Back 21

1. Cannot buy trust assets or sell assets to the trust.
2. Cannot borrow trust funds or make loans to trust.
3. Cannot use trust assets to secure personal loans.
4. Cannot personally gain through position as trustee.
5. Cannot purchase own securities as trust assets.
6. Cannot cross sell trust assets.

Front 22

Trusts: What is the "No Further Inquiry" rule in regards to self-dealing transactions not authorized by the court?

Back 22

There is no defense to self-dealing transactions unauthorized by the court. If it happens, no further inquiry. GOOD FAITH, ACTUAL BENEFIT IRRELEVANT.

Front 23

Trusts: Other than the trustee, to whom do the rules against self dealing apply?

Back 23

Trustee's relative & business associate, and corporations of which the trustee is a director, officer, or principal shareholder.

Front 24

Trusts: What are the remedies for breach of trust?

Back 24

1. Compel the trustee to perform duties.
2. Enjoin trustee from breaching trust.
3. Compel T to redress breach.
4. Order accounting.
5. Appoint receiver
6. Remove or suspend trustee.
7. Reduce or deny compensation.
8. Void act, impose lien or constructive trust or trace & recover trust property.
9. Any other appropriate relief.

Front 25

Trusts: When does the SoL start to run for breach of trust?

Back 25

1. When trustee repudiates the trust.
2. Trustee gives accounting fully disclosing the breaching conduct.
3. Trust relationship comes to an end.

Front 26

Trusts: What are a beneficiary's optoins when a prohibited transaction has taken place?

Back 26

1. Ratify
2. Hold trustee personally liable.

Front 27

Trusts: What are the measure of damages?

Back 27

1. Depreciation in the estate's value.
2. Profits made by the trustee.
3. Unrealized profits of the trust

Front 28

Trusts: If a trustee puts "trustee" or "as trustee" on Ks made w/in their powers as trustee, what effect?

Back 28

Prima facie evidence of intent to exclude trustee from personal liability.

Front 29

Trusts: What are the two exceptions to the rule that the trustee and not the B must sue a TP?

Back 29

1. T not able or refuses.
2. TP participates with T in committing a breach of trust.