Trusts

Front 1

Express trusts

Back 1

arise from the intention of the property owner.

Front 2

Implied trusts

Back 2

equitable remedies and arise by operation of law.

2 types:

Resulting: place property in the hand of rightful owners, even though there has been no wrongdoing.

Constructive: deprive a wrongdoer from retaining improperly obtained property.

Front 3

Settlor

Back 3

can be a trustee or beneficiary as well.

Must deliver title to the trust assets to the trust.

Front 4

Trustee

Back 4

owes a duty to someone other than himself.

Must have mental capacity (not a minor or mentally disabled).

Must have active duties.

Front 5

Duties of Trustee

Back 5

fiduciary duty to the beneficiaries to:

1) preserve property,
2) make trust property productive,
3) invest prudently,
4) administer the trust pursuant to settlor's directions,
5) keep accurate records,
6) segregate trust assets, and
7) exercise fairness with respect to all beneficiaries.

Duty of Loyalty and Good Faith.

Front 6

Beneficiaries

Back 6

Have a right to enforce the terms of the trust.

Can hold trustees personally liable for breach of duties.

Can recover wrongfully transferred property.

Front 7

Trust Elements

Back 7

A valid trust requires:
1) that settlor, with the requisite capacity, expresses a present intent to create a trust;
2) delivery of specific trust property;
3) an ascertainable beneficiary;
4) active duties imposed on the trustee;
5) a proper trust purpose; and
6) a trustee.

Front 8

Proper Trust Purpose

Back 8

Cannot be:
1) illegal;
2) violate RAP; or
3) contrary to public policy.

Front 9

Secret Trust

Back 9

where property is devised to another without reference in the will to the fact that the devisee promised the settlor-decedent to hold the property received under the will in trust for another.

Front 10

Semisecret Trust

Back 10

Testator indicates property is devised to a trustee "in trust" but fails to identify the beneficiaries.

These are void in a majority of jurisdictions.

Front 11

Trustee's Discretion Standard

Back 11

ordinarily an objective standard, but if given "sole" or "absolute" discretion a good faith standard.

Front 12

Totten Trust

Back 12

hybrid will and trust.

Front 13

Exculpatory Clause

Back 13

provision in the trust that relieves the trustee of liability for potentially wrongful acts (negligence or errors of judgment).

NOT acts of bad faith, intentional misconduct, recklessness, or gross negligence.

Front 14

Assignment of Trust

Back 14

In the absence of restrictive provisions, creditors can attach and foreclose upon a beneficiary's interest in a trust.

Restrictive provisions= discretionary, support, or spendthrift.

Front 15

Support Provision

Back 15

Health, education, maintenance, and support.

Front 16

Discretionary Trust

Back 16

Payment to the beneficiary is to be made, if at all, at the trustee's absolute discretion.

Creditors can attach once a distribution is made.

Front 17

Spendthrift Provision

Back 17

One the precludes:
1) a beneficiary from voluntarily transferring his interest in the trust; and
2) creditors from reaching that interest. No specific language needed.

Front 18

Termination

Back 18

Merger: sole trustee becomes only beneficiary.

Operation of law:
1) accomplishment of the material purpose of the trust have become illegal, impossible, or impractical;
2) trust res has been consumed, destroyed, or lost;
3) trust's purpose has been fully accomplished.

Front 19

Resulting Trust

Back 19

Two circumstance in which it arises:
1) when an express trust makes an incomplete disposition of assets or fails after property has been conveyed to the trustee; and
2) purchase money trusts.

Front 20

Constructive Trust

Back 20

obligates the holder of property to divest himself of it and transfer it to the person entitled to that asset.

SOF does NOT apply.

Front 21

Charitable Trusts

Back 21

Four significant aspects:
1) charitable purpose;
2) indefinite beneficiaries;
3) exemption from RAP;
4) use of cy pres doctrine.