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105 Cards in this Set
- Front
- Back
- 3rd side (hint)
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What are the three entities that have the name "trust" in them?
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express trusts (real trust w/ fiduciary obligations); resulting trusts and constructive trusts (both are only equitable remedies, no fiduc duties so not real trusts!)
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What are express trusts?
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legal device that allows an owner of property to make transfers of property and have those assets managed on behalf of someone else (rather than have the beneficiary manage the money by himself)
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Who is the person who creates the trust, and what are his rights?
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Settlor, and has legal title to manage the money
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Who gets the benefit of the trust and what are their rights?
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the Beneficiaries, who have equitable title to enjoy the distributions from the trust;
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What are the types of express trusts?
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2 types: 1) liftetime/inter vivos trust: set up during the lifetime of the settlor; 2) testamentary trust: set up in the settlor's will
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What are the reqs for a valid trust?
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8 reqs: 1) Settlor, who makes 2) delivery of legal title to 3) property (res, corpus, principal) to a 4) trustee who holds legal title for the benefit of a 5) beneficiary/ies with 6) intent to create a trust for 7) a lawful purpose 8) in a validly executed document
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Is consideration req to create a trust?
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no, it's a gift!
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What are the reqs of a settlor?
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anyone over 18, with capacity to enter into ks
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What are the reqs for delivery?
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titled assets (res) must be FORMALLY transferred to a trustee for delivery to be valid: this does NOT mean just physical transfer, it must be registered in the books naming the trustee (before the settlor dies of course)!
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What is 'property' or 'res' for purposes of trusts?
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property can be almost anything, but must be what settlor OWNS! CANNOT be a mere expectancy or promise of ownership in the future; must be INDENTIFIED property, not subject to future determination
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Who can be a trustee?
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for a lifetime trust: can be almost anyone since no court involvement; for a testamentary trust: created under court supervision, anyone can be EXCEPT for certain ppl (by statute): 1) ppl under 18; 2) judicially declared incompetents; 3) convicted felons; 4) those incapable b/c of drunkenness, dishonesty, want of understanding, or improvidence
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Can a non-resident alien be a trustee?
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ONLY IF: 1) that person is related to decedent (closely), AND 2) a NY resident serves as a co-fiduciary
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Does it matter if you don't have a trustee named in the trust?
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no, the court can appoint someone if needed
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Who are beneficiaries?
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must be 1) definite, and 2) ascertainable; NO AMBIGUITY allowed. if ambiguous, trustee holds in "resulting trust" for the residuary beneficiary of a will (or intestate heirs if no will)
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When is a beneficiary listed in a trust not ambiguous even if not directly naming someone?
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if it says "family" or "next of kin", this IS considered definite and ascertainable; court consults intestacy statute to determine who fits into these categorical terms
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What must be in the trust to show the intent of the settlor?
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1) must intend to create an ENFORCEABLE obligation: PRECATORY (non-binding) language is not enough; 2) trustee must be given duties to perform, if no duties then it's a "passive trust" which is NO trust at all
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What are examples of "precatory language" that makes the trust non-binding and possibly not enforceable?
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"I would like" for this to happen, "I request," "It is my desire"
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Is it enough to use the word "trust" in a document to show that the person intended to make it a trust?
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no, not alone, not enough to show intent to create a trust, must look at all of the language and facts to determine intent
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What are some facts that would indicate an intent not to make something a trust?
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if the language makes it look more like a landlord-tenant arrangement
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What does a "lawful purpose" mean for creating a trust?
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cannot call for a 1) commission of a crime, 2) destruction of property, 3) condition against public policy
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What is the main example used on the exam to show that a will has an unlawful purpose?
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if it restricts marriage or promotes divorce; BUT if it can have a purpose other than one offensive to public policy then can be valid: like trust giving income to widow until the spouse remarries, or partial restraints on marriage to persons outside the religion or ethnic group designated
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How is a trust executed?
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Must be both 1. in writing, and 2. signed by both the settlor AND trustee; AND EITHER: a) acknowledged by a notary public, OR b) signed by 2 witnesses
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What is the revocability of trusts?
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generally, ALL trusts are presumed to be IRREVOCABLE, UNLESS trust explicitly authorizes revocation
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What is a revocable lifetime/ inter vivos trust?
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1) main req is: at least 1 beneficiary who is not the settlor (settlor CANNOT be the sole beneficiary when also named the sole trustee!; protects fiduciary relationship, get another fiduciary to oversee what goes on; 2) settlor can be: a) trustee, b) income beneficiary for life, c) settlor's estate can be one of the beneficiaries of the principal (as long as 1 other beneficiary!), and d) settlor can retain power to terminate or amend trust
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What are reasons for creating a lifetime/inter vivos trust?
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a) can manage assets efficiently, esp if using professional trustee; b) helps plan for possible settlor's incapacity by avoiding guardianship: trustee takes that role b/c he has legal title so no need for court to appoint a guardian; c) avoids probate: none of principal of trust goes thru settlor's estate in probate
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What is probate?
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the process of proving a will; having it declared valid and effective following death of testator
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What are not added benefits of creating a lifetime/inter vivos trust?
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a) does not avoid taxes, b) if settlor keeps an income interest or power to revoke, the full trust assets will be included in settlor's gross estate for federal tax purposes (so dont escape taxes!)
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What are "pour-over" gifts?
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testamentary gifts (made in a will) to an existing revocable trust are OK; they avoid will formalities in the trust, gives administrative advantage b/c no need to re-execute trusts, just need to meet 2 reqs already mentioned for executing a trust (written, signed by settlor and trustee, then either notary public or 2 witnesses)
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What makes pour over gifts easier to administrate? What are the key requirements for a pour over gift to be valid?
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can change trusts during the lifetime of the settlor in ways that are somewhat easier than changing a will; to be valid: 1) trust must be in existence prior to the will and gift-giving, OR 2) trust must executed concurrently with the will
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What types of trusts can pour-over gifts be given to?
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not just limited to trusts created by the settlor, but can be to any existing trust, even created by other ppl
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Can a pour over gift be valid if the trust is unfunded or only partially funding during the settlor's lifetime?
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yes, still valid!
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Can an insured person make life insurance proceeds a pour over gift to a trust?
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yes, 2 ways: 1) insured can create an unfunded, revocable, inter vivos insurance trust and name trustee as life insurance policy beneficiary; or 2) have the trust be a testamentary trust and have the life insurance policy contract name 'the trustee named in my will' as the life insurance policy beneficiary
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Can proceeds of savings accounts or pension plans be handled the same way as life insurance proceeds?
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yes
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What is a totten trust?
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aka "bank account trust", in depositor's name, "as trustee for" a named beneficiary. it's the "poor man's trust" b/c no administration or technicalities needed (Mary Smith opens a bank account at First National Bank and the account name is "Mary Smith as trustee for John Smith", this is totten trust!)
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most tested on!!
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What is important about totten trust ACCOUNTS?
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1) depositor makes deposits and withdrawals as he wishes during depositor's lifetime (treats like normal bank account); 2) beneficiary has no beneficial interest during depositor's lifetime, but gets whatever is in the account when the depositor dies!
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What words are req to create a totten trust?
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no particular words req; even ITF is enough to indicate "in trust for" to create a trust!
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important on test!
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How do you revoke a totten trust?
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4 ways: 1) withdraw all $ in acct; 2) express revocation: 1. express revocation made during 2. lifetime by depositor making a 3. writing 4. naming the beneficiary/ies and 5. financial institution, 6. AND having revocation notarized AND 7. delivered to the bank (MUST HAVE ALL ELEMENTS OR REVOCATION INVALID!); 3) revocation in a will, must comply with same reqs for revocation during lifetime (all same elements!); 4) death of a beneficiary, $ goes back to depositor; 4) depositor can change beneficiary but must be same as revocation (notarized statement sent to financial institution, naming old and new beneficiary, etc.)
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Can creditors of the depositor access a totten trust?
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yes, can always reach totten trust acct balance, EITHER 1) before, OR 2) after the depositor's death, since depositor partially revokes each time she withdraws anything from totten trust acct. (if depositor has full access to the $ b/c still retains some ownership even if it's in trust for someone else, so do the creditors!)
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What do joint bank accounts that are not totten trusts look like?
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"John and Jane with Right of Survivorship"
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What is most popular issue about joint accounts?
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after one of the parties to account dies, can anyone block the money from going to the survivor of the joint tenancy? SOMETIMES!
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When can a person block money from a joint account from going to a survivor?
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if CLEAR and CONVINCING evidence shows that a survivorship was not intended when account created, only open as a CONVENIENCE to depositor, then survivorship lang set aside
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difficult standard to apply!
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How much of the account does each joint account holder have?
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1/2, no matter who deposits $: if 1 person makes entire deposit, considered a 'gift' of 1/2 to other account holder
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What happens if one of the joint account holders withdraws ALL of the $ and then the other holder dies?
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the estate of the dead holder can sue to recover half of the amount, b/c the account holder who took all the $ out was too early/greedy! if he had waited, he would have gotten entire amount in bank account anyway b/c of right of survivorship! but took too early $ that wasn't his to get, so now must give back half b/c withdrawing all the $ SEVERED the joint account w/ right of survivorship!
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What is the Uniform Transfers to Minors Act (UTMA):
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3 reasons to make gift to minor under UTMA: 1) avoids guardianship proceeding; 2) avoids trust, so court supervision does not happen; 3) qualifies for $13k per donee annual exclusion from fed and state gift tax
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rarely tested but may be ripe!
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How are gifts under UTMA made?
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must be made to a custodian (not trustee!), and must specify that made under the NY UTMA; can also be made in a will, so long as same req statutory lang used
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What are the duties of a UTMA custodian?
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1) hold, manage and invest the property under a PRUDENT PERSON standard; 2) pay over to the minor or for the minor's needs what part of property that custodian deems advisable; AND 3) pay what is left of property to minor when he turns 21 IF gift made AFTER Jan 1 1997, OR age 18 if gift made BEFORE Jan 1 1997
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Remember, what's the diff b/t what the UTMA creates, and a trust?
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the UTMA does not create a trust, it is a special statutory conservatorship where custodian does NOT hold legal title (like a trustee would), the MINOR holds legal title
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What are the tax consequences of the UTMA?
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if the donor names himself the custodian: then amount of gift is included in the custodian's gross estate for fed and state estate taxes; if donor names someone else as custodian: then amount of the gift is NOT included in custodian's gross estate for estate tax purposes
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For charitable trusts, what are the key things to remember?
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5 things: 1. must have indefinite beneficiaries, reasonably large group; 2. must be for charitable purposes; 3. can be perpetual; 4. cy pres can be used to change the trust; 5. AG has duty of representing beneficiaries of charitable trusts in the state
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Discuss the first key thing for charitable trusts, indefinite beneficiaries and large group:
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cannot have specific, named persons as beneficiaries (compare this to normal trusts, where MUST have named beneficiaries!) too small of a group: if say "to all my children", or "provide scholarships to all my descendants" or "to all orphans living nextdoor to me"; BUT EXCEPTION: a trust for Masses for relatives OK!
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Discuss the second key thing for charitable trusts, charitable purpose:
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health, education, and religion are most common
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Discuss the third key thing for charitable trusts, cy pres:
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if the stated purpose of the charitable trust cant be accomplished, or designated charity goes out of existence, court can use cy pres info to make trust be as near as possible to what the settlor wanted
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Discuss the fourth key thing for charitable trusts, AG duties:
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AG is indispensable party to any suit on construction or enforcement of a charitable trust; AG and donor have standing to sue to enforce trust's terms
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What are the non-trusts? (called trusts but not really trusts!)
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1) honorary trusts; 2) constructive trusts, 3) resulting trust
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Discuss honorary trusts
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no human being is the beneficiary of a private (non-charitable) trust (like gardens); they are 'honorary' b/c trustee would be acting on his honor rather than being legally imposed to care for whatever is the object of the trust; if an honorary trust gives a certain amount of $, then it goes to the residuary estate of the settlor
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What is a residuary estate?
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whatever remains in the probate estate after the payment of specifically designated gifts of items or cash
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Is there an exception to private trusts always needing a human being as a beneficiary?
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yes, the Pet Trusts: can only last as long as the duration of the pet's lifetime; also cemetery trusts
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Are there Pet Trusts in NY?
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yes, via Pet Statute!
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Who can enforce a pet trust?
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someone designated in the will or appointed by the court will have standing to enforce the trust and make sure purposes carried out
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What are cemetery trusts?
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trusts for perpetual care and maintenance of cemeteries and burial plots are CHARITABLE trusts and are OK even though no human beneficiaries; charitable so NO RAP problem
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What is a constructive trust?
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not a trust at all, just a flexible equitable remedy designed to: disgorge unjust enrichment that results from wrongful conduct; trustee's only duty is to convey the property to the person who, in equity, should have the property
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When does a constructive trust come into play in a will context?
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if a testator wishes to change the will but is wrongfully prevented by the beneficiaries of the old will, then after her death the original beneficiaries do not 'win', they only hold title on a constructive trust and must transfer title to the rightful beneficiary that the testator wished to name in new will b/c the original beneficiaries will otherwise be unjustly enriched by wrongful conduct
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equity steps in to re-route legal title to the rightful beneficiaries, even if the testator was prevented from signing the new will with witnesses before her death
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When does a constructive trust come into play in an intestacy (no will) context?
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if the intestacy statute would normally give part of the testator's estate to a wrongdoer child who killed the testator, equity jumps in and prevents the killer's unjust enrichment by making it into a constructive trust and as though the wrongdoer predeceased the testator! so his share would go to his own children (testator's granchildren)
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What is a resulting trust?
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it's an equitable remedy when a trust fails; often a Purchase Money Resulting Trust (PMRT) is recognized in vast majority of states (NOT NEW YORK!) and occurs when purchaser buys property and has title put in someone else's name (who is not a relative; usually the purpose is to hide the property for some reason)
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Why is PMRT helpful?
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if a purchaser of property puts title of property in another person's name just to preserve it (NOT as a gift to the title holder) and later wants to reclaim title but the title holder refuses to return title, PMRT allows purchaser to compel title holder to give up title (AGAIN, NOT in NY!) can work even if the understanding was made orally; in PMRT state you can introduce parol evidence
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NY does not follow PMRT, but are there exceptions?
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yes, if there is CLEAR and CONVINCING evidence (like witnesses to the transaction) that grantee expressly or impliedly promised to reconvey the land to the purchaser, then a constructive trust can be imposed to benefit the real purchaser (b/c theres fraud/deceit involved)
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What is the Statutory Spendthrift Rule
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provides protection from creditors in IRREVOCABLE trusts: protects trust beneficiary's interest from creditors by prohibiting voluntary or involuntary transfer of beneficiary's interest (making interest not alienable); if a trust is silent on the issue of revocability, then the trust is deemed irrevocable:
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very important for exam!
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How does NY treat Spendthrift rule?
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in most states you need an express clause giving protection from creditors to the beneficiary, but NY makes a spendthrift clause a default (for protecting income interests only) and must have a clause specifically saying there is NO spendthrift clause. Protects all INCOME interests in trusts ("to A for life"), NOT principal ("then to b") EXCEPT: protection applies to Remainder Beneficiary (principal) if there is an express clause stating so; REMEMBER: under the EPTL this does NOT apply when the beneficiary and the creator/settlor are the SAME PERSON! can ONLY protect beneficiaries other than the creator (this is b/c the creator cannot "frustrate" the claims of her creditors by placing her property in trust for herself, and if she does, then the disposition in trust for use of the creator is void as against existing or subsequent creditors of the creator
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irrevocable trusts
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What is typical Spendthrift clause language?
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"No beneficiary of this trust shall have the power to assign his or her interest, nor shall such interest be reachable by the beneficiary's creditors by attachment, garnishment, or other legal process"
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irrevocable trusts
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What are the major exceptions to the Spendthrift clauses?
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5 exceptions (again, only applies to beneficiaries who are NOT the creator of the trust!): 1) creditors who furnish necessities (food, shelter, clothing) can access interest; 2) ppl owed child support and alimony can recover; 3) federal tax liens, IRS has access; 4) creditors can access excess income beyond that needed for support and education (this is LAST RESORT remedy, must show all other remedies exhausted; also very subjective, what is needed for support is based on the life style of the beneficiary, which the court determines!); 5) the 10% levy provided by CPLR section 5205(e)
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irrevocable trusts
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How does the 10% levy work?
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all creditors together share the 10% levy, it is NOT 10% per creditor
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not used much in real life but ON the exam a LOT!
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Are there any limitations on the Spendthrift clause?
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yes, both statutory spendthrift clause protection and express spendthrift clause protection do NOT apply to any interests retained by the settlor; so creditors can access any interest of the settlor (the creator cannot "frustrate" the claims of her creditors by placing her property in trust for herself, and if she does, then under the EPTL the disposition in trust for use of the creator is void as against existing or subsequent creditors of the creator)
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irrevocable trusts
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What if a settlor creates a lifetime trust for himself but a remainder beneficiary in someone else (like a son) what happens with the Spendthrift clause?
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if settlor has lifetime trust then that gives him an income interest, which is NOT protected and creditors can access; but b/c son gets remainder interest and therefore gets the principal interest, protection from creditors DOES extend to the son!
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policy is to avoid having settlors hide money from creditors by putting it all in a trust for themselves; BUT can protect other beneficiaries
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Unlike irrevocable trusts, is there any protection for revocable trusts?
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all revocable trusts are fair game for settlor's creditors b/c if retained power to revoke, meaning can withdraw from the trust or close it, then settlor has immediate access to the trust and so do creditors; this means creditors can get to the PRINCIPAL too!
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When can a trust be modified by trustees and/or beneficiaries?
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1) only when the objectives of the trust would be defeated or substantially impaired if the trust is NOT modified (and perhaps the part of the document that needs to be changed is now incidental to providing the purpose of the trust); 2) the purpose of the trust comes first, overriding any specific directions in the trust: called the CLAFLIN doctrine
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What is the test for being able to modify a trust?
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2 level test: 1. find out primary intent of the settlor regarding trust purposes), 2. look at specific directions in the trust instrument to determine whether, because of changes in circs, those specific directions in the trust would now frustrate the primary intent of the trust. if BOTH steps met, then directions can be changed by the court
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For modification, what does "invasion of the principal" mean?
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(via statute) if the settlor wanted the trust to provide income for a beneficiary, but the income is not enough to carry out the settlor's purpose of the trust, then the court can authorize the "invasion of the principal" to provide more money to the beneficiary
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tested on a lot!
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How can a settlor terminate a trust in NY?
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difficult to do! if silent about revocability in the trust, then the trust is irrevocable and unamendable; if the trust is NOT silent, it can be revoked if the power to revoke and amend is expressly reserved in the trust instrument! EXCEPTION: a settlor can terminate irrevocable trust if ALL 'beneficiaries in being' consent in WRITING (consent must be proved or acknowledged in the matter required for the recording of real property instruments (usually impossible b/c many are minors or incompetent, and no one can legally consent on their behalf) a beneficiary in being is NOT a child in gestation! must be born alive to count! also a disposition in this type of trust in favor of "class of persons described only as heirs, next of kin, or distributees, etc of the creator does NOT create a beneficial interest in such persons
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Can you terminate an irrevocable trust if it gives property to heirs or next of kin?
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yes, because that interest is not considered a beneficial interest yet and no consent from them needed (since can't be ascertained until the decedent's death anyway)
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What are heirs or next of kin?
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the ppl entitled to another's property by statutory intestate distribution at the time of a death of a decedent who failed to leave a valid will
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What are the categories to know in trust administration?
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a) trustee's powers; b) self-dealing; c) remedies for breach of fiduciary responsibilities; d) no further inquiry rule; e) actions against a third party when trustee engages in self dealing; f) indirect self dealing; g) exculpatory clauses;
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Discuss trustee's powers in trust admin in NY
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New York Fiduciary Powers Act (FPA) controls: sets out powers trustee has w/o court order and w/o express authorization in the trust; ALSO controls what an executor or administrator of a decedent's estate can do
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What is an executor and what is an administrator?
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executor: person nominated in a testator's will to act as personal rep and execute will provisions; carries out will's directions for disposition of testator's estate. administrator: appointed by probate court as personal rep to administer (collect, manage, distribute) the estate of a person who dies intestate or estate of a will that doesnt name an executor, or named executor unavailable
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What is the general approach to trustee's powers in NY?
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trustee can do almost anything with some clearly-defined specific exceptions. CAN DO: a) sell real or personal property; b) mortgage property; c) lease property; d) make ordinary repairs; e) contest, compromise, or settle claims, or f) do almost anything to manage the corpus (principal) of the trust. CANNOT DO: 1) engage in self-dealing; 2) borrow money on behalf of the trust; and 3) continue a business placed in trust w/o court approval (if do so w/o court approval, then trustee liable for losses by the business)
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big thing that a trustee CANT do on exam is the self-dealing
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What right does the beneficiary have to make demands against the trustee?
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beneficiary has the right to demand an accounting from the trustee fiduciary, and then beneficiary can either ratify a trustee's act or challenge the wrongdoing
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Describe self-dealing in more detail
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5 prohibitions on self-dealing: 1. trustee cannot buy trust assets or sell assets to the trust: absolute rule!; 2. trustee cannot borrow from trust funds: absolute rule (slightly diff than second general prohibition on trustee's power, which is can't borrow money ON BEHALF of the trust); 3. trustee cannot lend $ to the trust: absolute rule, and any interest earned on such a loan must be returned to the trust and any security given for the loan is invalid; 4. trustee cannot profit from serving as trustee, (except for appropriate trustee fees) and cannot take advantage of confidential info received while trustee; 5. corporate trustee cannot buy its own stock as a trust investment
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doesnt matter how good the deals are, if it's prohibited, it's prohibited!
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Are there any affirmative duties by the trustee to avoid self-dealing?
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yes, 2: 1. duty to segregate trust assets from personal assets: remedy is if commingled funds used to buy an asset and goes down in value, presumption it was personal funds of trustee...but if goes up, then presumption that it was trust's funds; 2. duty to earmark (set apart) trust assets by titling them in trustee's name (like "John Jones, Trustee")
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What are the remedies for breach of fiduciary responsibilities?
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3 choices: 1. beneficiary can sue to remove the trustee; or 2. beneficiary can ratify the transaction and waive the breach (usually happens when it's a good deal); or 3. beneficiary can sue for any loss due to the prohibited acts of the trustee: this is called a SURCHARGE
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What is the "No Further Inquiry Rule"
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(tough on trustees) a breach of fiduciary duty by engaging in self-dealing is an AUTOMATIC wrong and no further inquiry need be made: NO defenses! good faith or reasonableness are not defenses
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What if a trustee engages in self-dealing and gets into a transaction with an innocent third party? can the beneficiary sue the third party?
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no, not if the purchaser of the property was a BFP for value, with no notice
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How can you keep a third party purchaser from getting status of BFP?
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would have to show that the purchaser not only knew that she was dealing with a trustee, but that the trustee was engaged in self-dealing
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What is indirect-self dealing?
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the self-dealing rules also apply to loans or sales to a relative of the trustee, or business where the trustee is an officer/employee/partner/principal shareholder
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What are exculpatory clauses?
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CAN be used in a lifetime/inter vivos trust; CANNOT be used to shield trustees from liability for breach of a fiduciary duty in a testamentary trust b/c relieving executor or testamentary trustee from liability for negligence is void as against public policy
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Can a trustee be personally liable in contract?
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yes, possibly: must look to see how trustee signed the k, that's the key to determining liability: a) if trustee signed only on behalf of the trust, then no personal liability ("Jonathan Jones Trust, by Mary Jones, Trustee" or "Mary Jones, as Trustee of the Jonathan Jones Trust and not individually"), b) if trustee signed personally, and merely mentioned trust, then trustee personally liable ("Mary Jones, Trustee of the Jonathan Jones Trust")
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What happens if a trustee is found personally liable on a k?
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even if there is personal liability, the trustee will be reimbursed by the trust if 2 reqs are satisfied: 1) the k was w/in the powers of the trustee, AND 2) trustee was acting in the course of proper administration of the trust
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Can a trustee be personally liable in tort?
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yes, trustee is personally liable for all torts by trustee or trustee's employees; absolute rule, NO EXCEPTIONS; trustee should buy liability insurance and charge cost to trust
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What happens if a trustee is found personally liable in torts?
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can get reimbursement if 2 reqs satisfied: 1) trustee must have been acting within the trustee's powers, AND 2) trustee was NOT personally at fault
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Describe the trustee's investment power
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generally: trustee must manage the property of the trust on behalf of the beneficiary, meaning investment of the corpus of the trust
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What statute in NY can trustee's look to in guiding their investment powers?
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in NY, adopted the Uniform Prudent Investor Act (UPIA) gives broad latitude to trustees to choose investments: trustee can pursue what UPIA calls the Modern Portfolio theory of investment, where trustee creates a custom-tailored investment strategy for this particular trust
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use the 'buzz words' of the UPIA in essay answer!
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What do you have to remember about trustee's investment power?
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2 things: 1. trustee must consider the ROLE each investment plays within OVERALL trust portfolio; 2. trustee must consider the expected total return from income and capital gain (to see if prudent!); trustee does NOT have to justify prudence of each investment in isolation, can balance risky speculative investments with safer conservative investments
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How is prudence of investment measured?
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not measured by hindsight; look at trustee's decision to invest when made, not later
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What is the trustee's adjustment power?
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can exercise adjustment power, and allocate capital gains to income (if necessary to protect the income beneficiary, and vice versa) end goal is to be fair to all beneficiaries
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What is the key thing to remember about the UPIA?
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its flexibility to shape the investment strategy for maximum total return, along with flexibility to adjust income between the income and remainder beneficiaries to be fair to each of them
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Remember RAP
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no interest is valid if it could vest later than any life in being (someone alive at the time of the creation of the interest) plus 21 years; also NY has a reform statute that reduces all age contingencies down to 21 years
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What is the NY Rule Against Suspension of the Power of Alienation?
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any interest is void if it suspends power to alienate for a period longer than lives in being plus 21 years: meaning when there are no persons who TOGETHER could transfer a fee simple title (remember the spendthrift rule) also NY's statute reduces age contingencies for this too, not just RAP; usually this is a concern when either: 1) spendthrift income interests are in the trust (happens a lot in NY b/c spendthrift clause is the default when the trust is silent about income alienation), or 2) a life estate is created in an unborn person, or in an open class that may possibly include unborn ppl (they can't agree to sell their interests, so hinders alienation b/c may take too long to wait until they are born!)
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often in the same question as a RAP question; example of when you can together alienate 1 fee simple "to A and his heirs so long as no liquor consumed on the premises, and if ever consumed, then to B" this violates RAP, but doesnt violate Rule Against Suspension b/c A and B could together agree to sell the land in fee simple; something that does opposite, which does not violate RAP but violates suspension: "to Jane to provide income for her life, then on Jane's death to pay the income to Jane's children for their respective lives, then remainder to Bob" suspension violated b/c class includes unborn ppl and therefore they couldnt consent to transfer a fee simple and will not have a life in being to validate the duration of their spendthrift income interest, but ok with RAP b/c will know the class of children once Jane dies
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