Trusts

Front 1

Res

Back 1

Property that goes into the trust

Front 2

What is a trust

Back 2

arrangement for making gifts of property and for management of *****, under which trustee holds legal title to trust assets for benefit of beneficiaries, who hold equitable title

Front 3

What requirements for a valid trust?

Back 3

Settlor
Delivers
trust property
to trustee
for benefit of beneficiaries
with intent to creata trust

Must be lawful purpose, no consideration required

Front 4

Settlor

Back 4

Must have legal capacity, 18 or over

Front 5

When does Delivery requirement not apply?

Back 5

self-declaration of a trust

testamentary trust (created by will)

Front 6

Trust Property definition

Back 6

legal title to a specific interest in property must be conveyed to the trustee

subject matter must be certain and identifiable

Expectancy rights are not property! (unless consideration)

Front 7

Trustee

Back 7

if individual, must have legal capacity

Corp, only banks and trust companies

No trust fails for lack of truste, court appoints

Front 8

Can beneficiary remove a trustee?

Back 8

No, unless hostility prevents from carrying out his duties

Front 9

Beneficiaries

Back 9

if noncharitable trust, must be definite and ascertainable, and interest subject to RAP

If Charitable, cannot benefit identifiable individuals, not subject to RAP

Front 10

Resulting Trust

Back 10

Not a trust, happens when the trust fails

Front 11

RAP answer

Back 11

There is no perpetuties problem. Though there may be a perpetutities issue at common law, because it may best remotely, MA has enacted USRAP, which provides an alternative vesting period of 90 years. All interests created by ___'s will are almost certain to vest or terminate within 90 years after ___'s death, and therefore are likely to turn out to be valid even though there may be a vesting problem under the lives in being plus 21 years' period of the common law rule

Front 12

Is language precatory?

Back 12

Non-binding suggestion, i.e. request, hope, wish/desire, would like

NO TRUST

Front 13

Lawful purpose

Back 13

Nothing illegal, no total restraints on marriage or encouraging divorce invalid as against public policy

Front 14

Oral trusts of land

Back 14

Not valid, but oral trusts of personal property are valid

Front 15

Revoke or amend Trust?

Back 15

May not in Mass, UNLESS power to revoke EXPRESSLY retained by settlor

Front 16

Self-Declaration of Trust

Back 16

Settlor names himself as trustee, typically retains trust income for a life and powe to revoke, on death

Front 17

Totten Trust

Back 17

Bank account depositor declares that she is the trusttee of the account for a person who is to receive the money in the account at the time of the depositor's death.

Depositor retains full control of money in account during her lifetime

Not really a trust because no separate legal and equitable title, no formal requirements

Revocable by withdrawal, lifetime act manifesting intent to revoke and special contradictory provision in a will

Front 18

Pourover Will

Back 18

Makes bequest to inter vivos trust

Provides means for adding testamentary assets to a trust created by testator during lifetime

Front 19

Pourover Will validity

Back 19

Valid, even if trust is subject to revocation or amendment, unfunded during lifetime

Front 20

UTMA

Back 20

Uniform Transfers to MInors Act -
Provides convenient way to make gifts to minors that:
- avoid need for appointing a guardian to manage property,
and
- qualify for $13,000 per-donee annual exclusion under gift tax

Front 21

UTMA custodianship

Back 21

terminates at age 21, because terms are fixed by statute, cannot hold a distribution past 21

Front 22

Four rules re Charitable trusts

Back 22

- Not subject to RAP
- Must be for charitable purpose
- Must be in favor of reasonably large number of unidentifiable members of the public at large, cannot benefit identifiable individuals
- State charitable purpose no longer accomplished, reformed by Cy Pres

Front 23

Cy Pres

Back 23

As near as possible

Always applies in Mass, A.G. officiates

General intent and specific intents

Front 24

Constructive Trust

Back 24

Trust imposed to avoid unjust enrichment as a result of wrongful conduct, i.e. fraud, confidential relationship

Prove promises by clear and convincing evidence to avoid

Front 25

Honorary Trusts

Back 25

Trust to use income for a purpose with no individual beneficiary who can enforce

Valid only if the trustee chooses to do it

Front 26

Purchase Money Resulting Trust

Back 26

When A pays purchase price for land in B's name with NO RELATION, presumption he had some other reason for taking trust in B's name; A can compel title at any time

If related, then it is a gift

Front 27

Spendthrift Clause

Back 27

Prohibits transfer of beneficiary's interests

Creditors can't at money while in trust until beneficiaries received, unless gov wants it, alimony and child support

Exception - fraudulent conveyance (intent to defeat, defraud, delay creditors)

Front 28

No Self-Dealing rule

Back 28

- Trustee cannot buy/sell trust assets to himself
- Trustee cannot borrow trust funds
- Trustee cannot loan funds to the trust
- Trustee cannot profit from serving as trustee
- Corporate trustee cannot buy its own stock as a trust investment
-

Front 29

Action Against Fiduciaries SoL

Back 29

Doesn't begin to run unless:
- repudiates the trust (denies its existence re: property)
- dies or resigns
- gives accounting that makes full disclosure of facts upon which action is based

Front 30

Breach of trust actions

Back 30

Trustee breaches ANY fiduciary duty; in addition to action to remove, beneficiary may:
- ratify transaction and waive the breach
- bring surcharge action for loss
- if self-dealing, automatic wrong no good faith defense, only issue is measure of damages

Front 31

Exculpatory clause

Back 31

"Trustee not liable except cases of gross negligence, bad faith, fraud."

Valid unless purports to relieve liability for bad faith, gross negligence, fraud

Front 32

Uniform Prudent Investor Act

Back 32

Prudence is measured by conduct when investment decision is made, not outcome of the investment performance;
- role each investment plays within overall trust portfolio
- expected TOTAL RETURN from income and capital gain

Front 33

Uniform Principal & Income Act

Back 33

Trustee has adjustment power, and allocate capital gains and principal to income

- Investment duties may be delegated to an investment advisor

Front 34

Distributions received from an entity

Back 34

All money is allocated to income, all receipts other than money allocated to principal

Front 35

10% rule

Back 35

receips from assets with declining value over time (mineral leases, patents, copyrights, book royalties) 10% is allocated to income and balance to principal unless trust decides otherwise

Front 36

Expenses

Back 36

Trustee entitled to "reasonable" compensation

Ordinary expenses charged against income

Capital expenditures are charged against principal

Front 37

Early Termination of Trust

Back 37

Beneficiaries can terminate trust prior to time fixed for its termination if:
- all beneficiaries who are sui juris (over 18, have capacity);
and
- there is no further trust purpose of the settlor to be served

Guardians may not give consent on minor's behalf

Front 38

Powers of appointment

Back 38

a power conferred upon a trust beneficiary allowing the trust beneficiary to
choose who next will take the beneficial interest after them

Front 39

Types of appointment powers

Back 39

General - donee may appoint the property to himself, his estate, his creditors, or the creditors of the estate

special power of appointment
• a power not exercisable in favor of the donee, his estate, his creditors, or creditors of his estate
• limited amount of people can receive the benefit