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46 Cards in this Set
- Front
- Back
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What is a Trust?
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An arrangement under which the trustee holds legal title to property for the benefit of te beneficiaries.
Trustees have burdens Beneficiaries have benefits of property ownership. |
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Trustee Liabilities
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Trustee is subject to fiduciary standards, he is not privileged to use trust property as his own. Harsh self dealing rules preclude him from doing so.
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Requisites of a Trust
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(1) The creator, (2) delivers (3) legal title of the trust assets (4) to trustee (5) for the benefit of the beneficiaries (6) with intent to create a trust (7) for a valid purpose.
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Delivery
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Requirement does not apply to self-declaration of trust or testamentary trust.
But for intervivos, there must be delivery of subject matter of the trust. |
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What is the res?
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The corpus, principal or subject matter of the trust.
There must be a specific interest in property to which the trustee's duties relate. Res must be CERTAIN AND IDENTIFIABLE, if no, NO trust !! |
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Are expectancies property rights?
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No, no claim or property right in expectancies. A trust creating a trust of a mere expectancy is a gratituous promise to create a trust in the future.
If the property right vests at a later time, the trust creator has to reaffirm his intent by word or conduct. |
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Effects of a gratituous promise to make a trust
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A trust arises when all elements of a valid trust have been met if, at that time the settlor manifests an intention then to create a trust.
If promise is supported by consideration, under K principles trust automatically attaches when property is received. |
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Does a trust fail for lack of trustee?
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NO TRUST FAILS FOR LACK OF TRUSTEE!! The court will appoint one, unless power is personal to named trustee (rare).
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Can a trust be the beneficiary of an insurance policy?
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Yes, an empty trust can be created without any assets in it if it is intended as the beneficiary of an insurance policy or pension plan or a will.
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Beneficiaries requirements for a PRIVATE TRUST
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A private trust must have ascertainable beneficiaries. The rule is just the opposite for charitable trusts.
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Beneficiaries requirement for a CHARITABLE TRUST
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Such trusts must be for a reasonably large and unidentifiable segment of the public at large.
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Can an instrument invalid as a trust for lack of ascertainable beneficiaries be given effect as a power of appointment?
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No, because a trustee is under an obligation to perform and the holder of a power of appointment is not.
But the Kansas (minority) view is that it is a special power of appointment because he cannot appoint the $ to himself. Make this argument!!! |
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Can the shares under the trust be left at the trustee's discretion?
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Yes if class is defined.
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What is a resulting trust?
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Reversion back to settlor.
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What is an honorary trust?
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Trust for animals until the death of the last animal.
The trust can say who has standing to enforce it and if not, court will appoint someone. When last dog dies then $ reverts back through a resulting trust. |
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Can the sole beneficiary also be the sole trustee?
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No, because who would make the trustee accountable. But you can have 2 beneficiaries with one of them being the sole trustee.
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Are revocable trusts valid?
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Yes, even though the settlor retains the right to revoke, alter, or amend the trust.
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Is a gift by will to a revocable, amendable trust valid?
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Yes this is also called the POUR OVER WILL, under the Uniform Testamentary Additions to Trust Act. Only requirement is that the trust be in existence before or executed concurrently with the will.
The devised property is added to the trust as it exists at Ts death. |
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What is a Totten Trust?
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It's a form of trust created where one party (the settlor of the trust) places money in a bank account or security with instructions that upon the settlor's death, whatever is in that account will pass to a named beneficiary.
Account is reachable by depositor's creditors before and after his death. A Totten trust can be revoked by the depositor's will. |
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Are oral trusts enforceable?
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Oral trusts of personalty are enforceable. But trusts containing land must be in writing to satisfy the SOF.
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Does an invalid oral trust prevent a person who relied on the promise to get the subject matter of the trust?
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Not always, sometimes a CONSTRUCTIVE trust gets imposed on the alleged beneficiary where the property was deeded to someone else and the other person and there was:
1. FRAUD, by the other person by promising he would convey to the alleged beneficiary in trust and he doesn't. 2. Duress or undue influence: where transfer was obtained by undue influence. 3. Confidential relationship: grantee-trustee served in confidential relationship to the grantor-settlor. Equity is concerned that one would take advantage of a confidential relationship to enrich himself. |
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If a constructive trust is not imposed, what happens to the property?
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The trustee/grantee gets to keep it he hides behind the SOF.
But the intended grantee can still sue in quantum meruit for value of her services. |
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Is an oral promise to make a devise in a will that is supported by consideration enforceable?
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No, wills contracts must always be express, they are never implied.
But the promisee that relied in the promise and performed can sue in quantum meruit. |
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Secret trust
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no mention of a trust – unjust enrichment if don’t impose constructive trust
Must show by clear and convincing evidence. But the trustee must be aware and agree to act as trustee. |
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Semi Secret trust
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Resulting trust – not enforced (to be paid to who the trustee knows to be paid – NO – list in will or against statute of Wills) – no unjust enrichment (trustee wasn’t going to keep the money was just going to pay to “secret” people – law says no)
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Charitable trusts
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1. Must be for a charitable purpose
2. Must be in favor of a reasonably large number of unidentifiable beneficiaries |
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What is the primary intent doctrine on charitable trusts?
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Why did the settlor create the trust? If broad intent, court can reform.
If continuing to adhere to a specific purpose frustrates the purpose of the trust, the court will reform. |
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Can a beneficiary alienate his income interest?
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Yes, an income interest in property is theoretically alienable.
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Can creditors reach the trust to enforce an obligation against the beneficiary?
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No, because the trust does not belong to the beneficiary, the trustee does.
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What is the effect of anti-assignability and anti-creditor's clauses?
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Beneficiary cannot assign and creditors cannot reach. They're out of luck.
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What are the exceptions to anti-assignability and anti-creditors clauses?
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Child support, alimony and Taxes.
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Can a beneficiary sue the trustee for failing to pay a creditor?
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No, a beneficiary who participates in breach is ESTOPPED from suing thereon.
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Pure Discretionary Trusts
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The beneficiary gets his benefits at the discretion of the trustee. Trustee cannot be forced. Trustee must be:
1) Honest 2) Act in good faith 3) Proper motives |
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Can you put assets in a trust for own benefit and avoid creditors?
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No. If trust has a spendthrift clause it will be unenforceable and creditors will reach any right. If D has right to revoke the trust, creditors will force him to do so.
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What are the trustee's fiduciary rules?
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Can’t buy/sell to itself even at market rates, can’t borrow, can’t sell from one trust to another trust, can’t get personal gain.
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What is the PRUDENT INVESTOR RULE?
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PRUDENT INVESTOR – reasonable rate of return, balance return with risk, diversity(spread the risk), do not co-mingle, KS allows delegation – must use reasonable care.
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What is the duty of IMPARTIALITY?
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A trustee must be fair to all beneficiaries (unless otherwise stated in trust).
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Liability for breach of trust?
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REMEDIES by the beneficiary:
1. Can ratify the transaction and waive the breach 2. He can sue for the resulting loss. Surcharge 3. Trace and recover the property. |
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Liability for acts of a co-trustee
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No liability unless fault
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Can you delegate a trustee function?
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Yes but must use reasonable care in selecting agent, cannot improperly delegate responsibility to agent, and has to remedy improper actions.
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What happens if beneficiary consents to a breach of trust?
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Waives his right to sue.
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Trust accounting
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Income beneficiaries get the income - dividends, interest, rent, -
Proceeds are principal Expenses dividended between expenses that are income based or principal based Can rebalance |
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Discretionary Need Trust
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Distributed based on beneficiary's need.
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Termination
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1. All beneficiaries consent
2. No more trust purpose |
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Lucas v. Ham
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RAP too difficult to understand – not atty negligence
California Case |
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What is a durable power of attorney?
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Instrument executed by a party (principal) that gives another party (atty in fact) an agency authority to handle transactions on the principal's behalf. A durable power will not terminate on the disability or incapacity of the principal.
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