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70 Cards in this Set

  • Front
  • Back
private express trust
fiduciary relationship with respect to property whereby one person, the TE, holds legal title for the benefit of another, B, and which arises out of a manifestation of intent to create it for a legal purpose
property of the trust
any presently existing interest in property that can be transferred can be the corpus of a trust
illusory interests
cannot be the subject matter of a trust (future profits, debt owes to B, mere expectancy)
who can be the beneficiary
any ascertainable person or group of people
a trust must have a trustee but a court will not allow the trust to fail solely because there is no TE- will appoint
manifestatation of trust intent
must be present manifestation, no precatory words without parol evidence
private express trust to take effect at SR's death
comply with statute of wills
private express trust during lifetime
1) transfer in trust (TP is TE), personal needs delivery, real prop needs SOF
2) declaration in trust (SR is TE), no issue of delivery for personal
illegality at creation
if can excise bad from good trust will stand

otherwise, court will invalidate trust at inception or allow TE to keep property for himself
illegality after creation
resulting trust decreed- resulting TE transfers property back to SR/estate
charitable trust
substantial benefit upon society
1) help poor
2) advance education
3) help sick
4) promote religion
creation of charitable trust
1) manifestation of trust intent
2) at TR's death by will or
3) during TR's lifetime by declaration of trust/transfer in trust
4) of presently existing interest in property that can be transferred
5) for legal purpose
rule against perpetuities and charitable trusts
RAP does not apply
cy pres
as nearly as possible

if SR manifests a general charitable intent but mechanism for effectuating is not possible or practicable, court can modify the mechanism cy pres to effectuate SR's general charitable intent
pour-over wills
SR creates IV trust with provision in will devising part/all estate to the trust
effectuating pour-over wills
1) incorporation by reference
2) facts of independent significance
3) UTATTA uniform testamentary additions to trusts act
honorary trusts
trust that has no ascertainable beneficiary and confers no substantial benefit upon society
(goal of settlor, TE not required to carry out goal but has power to)
if TE refuses to serve honorary trust
trust fails (won't appoint new TE)
RAP and honorary trusts
always violate RAP, strike at inception and have resulting trusts

or allow to endure for 21 years then resulting trust follows to end trust
totten trust
named b takes whatever is left in account at death of owner of account
private trust and voluntary/involuntary alienation
B can do both
spendthrift trust
B cannot transfer right to future payments of income or principal and creditors cannot attach B's right to future payments of income or principal

(assignment sometimes recognized on ground that B gives TE order to pay assignee and B can always revoke that order)
preferred creditors that can collect from spendthrifts
1) gov creditors
2) those who provide necessities of life to B
3) child support
4) spousal support
5) alimony
6) tort judgment creditor
any creditor has right to attach
surplus as measured by B's station in life
SR creates spendthrift for himself
spendthrift provisions not recognized to insulate creditors, jurisdictions split to voluntary alienation
support trusts
TE required to use only so much of income/principal as is necessary for B's health, support, maintenance, or education
support trusts and voluntary/involuntary alienation
cannot transfer right to future payments but preferred creditors can attach
discretionary trusts
TE given sole and absolute discretion in determining how much to pay the beneficiary if anything and when to pay the beneficiary if ever
discretionary trusts and voluntary alienation
cannot voluntary transfer right to future interests because may not get anything
if assignment, assignee steps into shoes and if TE decides to pay assignee can get it
discretionary trusts and involuntary alienation
creditors cannot attach because nothing to attach- could get nothing
if TE has notice of debt and creditor's judgment against B and TE decides to pay, must pay creditors or be held personally liable
resulting trust
implied in fact turst based upon presumed intent of parties- resulting TE will transfer property to settlor/estate
how resulting trust arises
1) private express trust ends by its own terms
2) private express trust fails because no B
3) charitable trust ends because of impossibility and cy pres cannot be used
4) private express trust becomes illegal
5) excess corpus in private express trust
6) purchase money resulting trust
7) semi-secret trust
purchase money resulting trust
A pays consideration to B to have title transfered to C

if A/C closely related, C holding as a purchase money resulting trustee for benefit of A
if A/C not, A simply made gift to C
semi-secret trusts
arises when will makes gift to person to hold as TE but does not name beneficiary (usually turns into resulting trust)
constructive trust
wrongdower becomes TE to transfer property to intended beneficiary as determined by the court
when constructive trust arises
1) TE self-dealing and makes profit from PET or CT
2) fraud in the inducement or undue influence
3) secret trusts
4) oral real estate trusts/breach of promise
secret trusts
will on its face makes a gift outright to A but gift given on basis of oral promise by A to use property for benefit of B
parol evidence admissible to show beneficiary was B
oral real estate trusts/breach of promise situations where TE will not be able to invoke SOF to keep property for himself
1) fiduciary relationship between GR and TE
2) fraud in the inducement on TE's part
3) detrimental reliance by intended beneficiary
trustee powers
1) all enumerated powers
2) implied powers- helpful/approprate to carry out trust purpose
TE duties owed to B's
1) duty of loyalty
2) duty to invest
3) duty to earmark
4) duty to segregate
5) duty not to delegate
6) duty to account
7) duty of due care
duty of loyalty
requires TE administer trust for benefit of beneficiaries having no other condition on mind (no self dealing)
consequences of self-dealing
TE surcharged and has to make good the loss

TE constructive TE as to profits
duty to invest
1) state lists
2) common law prudent prson test (duty to invest requires TE to act as reasonably prudent person investing his own property, trying to maximize income while preserving corpus)
3) Uniform Prudent Investor Act- TE must invest as prudent investor, performance measured in context of entire trust portfolio
duty to invest rules
1) duty to diversify
2) no speculating
c) breach- must make good loss, profits must be affirmed by beneficiaries
duty to earmark
requires TE to label trust property as trust property
CL consequenes of failure to earmark
TE is personally liable even if no causal relationship required between failure to earmark and loss
modern consequenes of failure to earmark
TE personally liable only if loss was caused by failure to earmark
duty to segregate
TE cannot comingle his own personal funds with trust funds or with different trust funds

TE can be removed and held liable for any loss
duty not to delegate
TE can rely on profesional advisors in reaching a decision but cannot delegate decision-making authority to these advisors

cannot delegate to third person or another TE
multiple trustees can act
CL- only if unanimously
modern- by majority decision
duty to account
requires TE on regular basis to give B's a statement of income and expenses of the trust (otherwise Bs can file action for an accounting)
duty of due care
TE must act as a reasonably prudent person dealing with his own affairs
remedies of B for breach of duties
1) damages
2) constructive trust
3) tracing and equitable lien on property
4) ratify transaction if good for beneficiary
5) remove TE
CL liability in contract
TE sued in personal capacity, personal assets are at stake, can get indemnification from trust assets if TE acted within own powers and was not personally at fault

only sued in representative capacity if k itself provided that TE sued in capacity
modern liability in contract
if other person to k knows TE entering in representative capacity, TE must be sued in representative capacity
CL liability in tort
TE sued in personal capacity, if without personal fault can get indemnification from trust assets
modern liability in tort
TE sued in individual capacity and is personally liable only if TE personally at fault
modification by SR
SR can modify trust if SR expressly reserves power to modify or revoke
modification by court
by cy pres or deviation power
deviation power/doctrine of changed circumstances
where court exercises its deviation power the court changes the administrative/management provisions of the trust (not changing beneficiaries)
elements for courts to use deviation power
1) unforeseen circumstances on the part of the SR
2) necessity (deviation needed to preserve trust)
SR has power to revoke
majority- expressly reserved in TI
minority- unless TI is expressly made irrevocable
termination of irrevocable trusts
1) SR and all B's agree to terminate (account for contingent remainderman ad litem)
2) all B's agree to terminate and all material purposes have been accomplished
3) by operation of law
termination by operation of law
passive trusts and statute of uses
statute of uses
PET and real property and trust is passive-->Bs get legal title by operation of law and trust terminates

doesnt apply to personal property but same result under equity because doesnt like to see useless act done
income for life tenant
cash dividends, interest income, net business income
life tenant's expenses
paid by interest-
interest on loan indebtedness, taxes, minor repairs
income for remainderman
stock dividends, stock splits, net proceeds on the sale of trust asset
remainderman's expenses
principal part of loan indebtendess, major repairs/improvements
adjustment power of TE
TE can disregard above stated rules if different allocation is necessary to administer the trust fairly