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47 Cards in this Set
- Front
- Back
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What are requirements for the creation of a trust?
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A SETTLOR must DELIVER TRUST PROPERTY to a TRUSTEE for the purpose of BENEFICIARIES with the INTENT TO CREATE A TRUST that exists for a lawful purpose
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What is the legal capacity requirement for creation of a trust?
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Must be 18 years old
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When is delivery not required for a trust?
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For a testamentary or self-declaratory trust
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What are the requirements for delivery?
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1) For an inter vivos trust that names third party as trustee the corpus must be delivered
2) Must contain intent to convey legal title to trustee |
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What is a trust?
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A trust is the separation of legal title and beneficial enjoyments
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What are the requirements of trust property?
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Must be conveyed to trustee.
The subject matter must be CERTAIN AND ASCERTAINABLE |
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What are the requirements for a trustee?
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1) Must have legal capacity to enter contracts
2) If out of state, must appoint resident agent for service of process. If bank or trust company, cannot serve as testamentary trustee unless authorized in Virginia. |
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What are the requirements for a beneficiary?
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If Private must be DEFINITATIVE and ASCERTAINABLE
If charitable beneficiaries cannot be INDIVIDUALS |
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Are oral trusts valid?
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Only if proven by CLEAR AND CONVINCING EVIDENCE
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What happens if a settlor doesn't provide for a trustee?
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A trust can still be valid if clearly manifested intent to create a trust. A court will appoint a trustee.
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What is default rule for inter vivos trusts created by a settlor on or after July 1, 2006 in regard to revocabaility?
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Revocable unless will says otherwise
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What is default rule for inter vivos trusts created by a settlor BEFORE July 1, 2006 in regard to revocabaility?
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Irrevocable unless said otherwise
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What is a pour over will?
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It allows a will to add to the assets of a trust even if trust created AFTER execution of will.
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What is a self-declaration as trust? Is it valid in Virginia?
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Yes it is valid in Virginia. It's when settlor declares herself as a beneficiary.
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When can you contest a validity of a trust? (SOL)
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Earlier of
2 years after settlors death OR 6 months after trustee sent a person a copy of the trust intstrument |
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When can a trustee NOT distribute trust property in accordance with terms of trust?
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1) Trustee knows of pending judicial proceeding
2) Person notifies trustee she is filing suit in and the suit starts in 60 days. |
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What are the requirements for a charitable trust?
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1) Must be for a charitable purpose
2) Favor of indefinate number of beneficiaries |
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When does the doctrine of cy pres mean? When does it come in effect?
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Cy Pres means making the trust conform with a close-to intent of testator.
It should come in effect if 1)trust becomes unlawful, impractiable, impossible to achieve or wasteful 2) Trust does not fail in whole or in part and 3) Trust does not revert to settlor |
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What is an honorary trust?
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A trust for a animals ALIVE during settlor's lifetime. It terminates at death of animal.
A trust to maintain a cemetery will be ok. |
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What is a constructive trust? When is it used?
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It is an equitable device to remedy a bad act.
The bad requires 1) Wrongful conduct and 2) unjust enrichment |
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What is a purchase money resulting trust? What is the result?
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It is a resulting trust when A pays for land, but gives title to B.
If B is not a relative, presumption that A has a right to the land, only to be rebutted by clear and convincing evidence that it was a gift. |
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What is a spendtrhift trust?
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A trust with a clause that restricts ability of creditor of BENEFICIARY (not settlor) creditors to get access to it UNLESS it is against public policy.
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What are public policy reasons for NOT enforcing a spendthrift trust?
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1) Child support obligations
2) Lawyer provided services for protection of beneficiary's interests 3) Claims by Government 4) Claims of state agency for reimbursement for public assistance, including medical assistance 5) Creditor can reach a MANDATORY DISTRIBUTION or income or principal if trustee avoids paying to avoid creditor getting it |
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Can a person create a trust to prevent creditors from getting to it?
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NO!
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What are the fiduciaries obligation of a trustee?
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No SELF-DEALING. Includes:
1) No buy/sell trust assets or himself 2) Trust cannot borrow trust funds 3) Trust cannot loan funds to the trust 4) Trustee cannot profit from serving as trustee (but can compensated) 5) Corporate trustee cannot buy its own stock as a trust investment |
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Can a beneficiary of a trust sue a BFP from a trustee?
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No! But must be BFP (no notice)
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What is the statute of limitations for suing trustee for breach of duties?
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One year if trustee provides ACCOUNTING that provides facts that show breach of trust and informs them of one year to file suit
2) FIVE YEARS after trustee's removal, termination of beneficiary's trust interest, termination of trust. |
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Can beneficiaries waive trustee's self-dealing rules? Can the settlor?
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Yes to both! The settlor can also waive self-dealing rules
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What can settlor not modify in a trust?
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1)Can't be created for illegal purpose
2)Eliminate good faith duty 3) Exculpate trustee's liability for BAD FAITH, INTENTIONAL, or RECKLESS torts 4) Limit SOL 5) Limit power of court to modify or terminate, etc. |
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What are the duties of a trustee?
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1) Duty to act prudently
2) Duty of impartiality to beneficiaries and remaindermen 3) Duty to control and protect trust property (including insurance if prudent) 4) Duty to collect trust property and enforce and defend claims 5) Duty to segregate trust property 6) Duty to keep adequate records 7) Duty to keep beneficiaries reasonably informed 8) Duty to furnish copy of trust instrument 9) If irrevocable trust created after July 1, 2006 -- 60 day notice provision of 10) Duty to furnish annual report |
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What must be included in notice for irrevocable trust made after July 1, 2006
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1) trust's existance
2) identity of settlor 3) Right to request copy of trust instrument 4) Right to annual report 5) Trustee's name, address, and telephone # |
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What does the Uniform Prudent Investor Act provide?
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Prudent investing which is defined as A MODERN PORTFOLIO THEORY OF INVESTING (so all treasury bonds may not be prudent)
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What the Uniform Principal and Income Act?
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Allows trustee to take allocation and adjustment between income and principal.
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What is the 10% percent rule?
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Receipts from assets that produce income for a limited time means TEN PERCENT allocated to income; 90% to principal
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How are expenses of trust administration split?
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1/2 from income; 1/2 from principal
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What are ordinary expenses and what are they charged against?
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Charged against income, include
1) property taxes 2) Casualty insurance premiums 3) ordinary repairs 4) mortgage interest payments |
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What are capital expenditures and what are they charged against?
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They are charged against PRINCIPAL, and include
1) extraordinary expenses 2) capital improvements 3) Environmental expenses 4) Mortgage principal payments |
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What is a unitrust?
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A trustee can convert a trust into a TOTAL RETURN UNITRUST where discretion of income payments is fixed percentage.
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What are obligations of trustee if she delegates powers?
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Must have used reasonable care for
1) selecting agent 2) establishing terms of delegation 3) periodically reviewing agent's actions |
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Can a trustee be personally liability for tort?
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No, unless trustee personally at fault
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Can a trustee be liable for a contract entered into on behalf of trust?
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No, unless trustee's fiduciary capacity not disclosed in contract
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When can trust be modified during settlor's lifetime?
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Settlor (or power of attorney, conservator or guardian) and beneficiary all consent
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When can modification occur after settlor's death?
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1) If all beneficiaries consent and modification is not inconsistent with material trust purpose
2) If SOME beneficiaries consent and court is satisfied that a) Trust could be modified if all the beneficiares consented b) interests of beneficiary who does not consent will be adequately protected |
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When can trust be terminated? (2)
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1) All beneficiaries consent and continuance of trust NOT NECESSARY to achieve any material trust purpose
2) Court ordered |
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When can court modify or terminate a trust without beneficiary's consent?
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1) unanticipated circumstances that mades modification or termination to further purpose of trust
2) for TAX PURPOSES 3) No trust purpose remains to be acheived or if purposes of trust became UNLAWFUL, contrary to public policy, or IMPOSSIBLE to achieve 4) Uneconomic because trust worth less than $100,000 and maintenance of trust not enough to justify admin costs. |
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When can a trustee merge trusts?
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By providing beneficiary notice and does not materially adverse affect achievement of trust
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When can a trust be modified because of mistake?
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If proved by CLEAR AND CONVINCING EVIDENCE that settlor's intent and terms were a mistake
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