Trusts

Front 1

private express trust

Back 1

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

Front 2

property of the trust

Back 2

any presently existing interest in property that can be transferred can be the corpus of a trust

Front 3

illusory interests

Back 3

cannot be the subject matter of a trust (future profits, debt owes to B, mere expectancy)

Front 4

who can be the beneficiary

Back 4

any ascertainable person or group of people

Front 5

trustee

Back 5

a trust must have a trustee but a court will not allow the trust to fail solely because there is no TE- will appoint

Front 6

manifestatation of trust intent

Back 6

must be present manifestation, no precatory words without parol evidence

Front 7

private express trust to take effect at SR's death

Back 7

comply with statute of wills

Front 8

private express trust during lifetime

Back 8

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

Front 9

illegality at creation

Back 9

if can excise bad from good trust will stand

otherwise, court will invalidate trust at inception or allow TE to keep property for himself

Front 10

illegality after creation

Back 10

resulting trust decreed- resulting TE transfers property back to SR/estate

Front 11

charitable trust

Back 11

substantial benefit upon society
1) help poor
2) advance education
3) help sick
4) promote religion

Front 12

creation of charitable trust

Back 12

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

Front 13

rule against perpetuities and charitable trusts

Back 13

RAP does not apply

Front 14

cy pres

Back 14

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

Front 15

pour-over wills

Back 15

SR creates IV trust with provision in will devising part/all estate to the trust

Front 16

effectuating pour-over wills

Back 16

1) incorporation by reference
2) facts of independent significance
3) UTATTA uniform testamentary additions to trusts act

Front 17

honorary trusts

Back 17

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)

Front 18

if TE refuses to serve honorary trust

Back 18

trust fails (won't appoint new TE)

Front 19

RAP and honorary trusts

Back 19

always violate RAP, strike at inception and have resulting trusts

or allow to endure for 21 years then resulting trust follows to end trust

Front 20

totten trust

Back 20

named b takes whatever is left in account at death of owner of account

Front 21

private trust and voluntary/involuntary alienation

Back 21

B can do both

Front 22

spendthrift trust

Back 22

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)

Front 23

preferred creditors that can collect from spendthrifts

Back 23

1) gov creditors
2) those who provide necessities of life to B
3) child support
4) spousal support
5) alimony
6) tort judgment creditor

Front 24

any creditor has right to attach

Back 24

surplus as measured by B's station in life

Front 25

SR creates spendthrift for himself

Back 25

spendthrift provisions not recognized to insulate creditors, jurisdictions split to voluntary alienation

Front 26

support trusts

Back 26

TE required to use only so much of income/principal as is necessary for B's health, support, maintenance, or education

Front 27

support trusts and voluntary/involuntary alienation

Back 27

cannot transfer right to future payments but preferred creditors can attach

Front 28

discretionary trusts

Back 28

TE given sole and absolute discretion in determining how much to pay the beneficiary if anything and when to pay the beneficiary if ever

Front 29

discretionary trusts and voluntary alienation

Back 29

cannot voluntary transfer right to future interests because may not get anything
BUT
if assignment, assignee steps into shoes and if TE decides to pay assignee can get it

Front 30

discretionary trusts and involuntary alienation

Back 30

creditors cannot attach because nothing to attach- could get nothing
BUT
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

Front 31

resulting trust

Back 31

implied in fact turst based upon presumed intent of parties- resulting TE will transfer property to settlor/estate

Front 32

how resulting trust arises

Back 32

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

Front 33

purchase money resulting trust

Back 33

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

Front 34

semi-secret trusts

Back 34

arises when will makes gift to person to hold as TE but does not name beneficiary (usually turns into resulting trust)

Front 35

constructive trust

Back 35

wrongdower becomes TE to transfer property to intended beneficiary as determined by the court

Front 36

when constructive trust arises

Back 36

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

Front 37

secret trusts

Back 37

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

Front 38

oral real estate trusts/breach of promise situations where TE will not be able to invoke SOF to keep property for himself

Back 38

1) fiduciary relationship between GR and TE
2) fraud in the inducement on TE's part
3) detrimental reliance by intended beneficiary

Front 39

trustee powers

Back 39

1) all enumerated powers
2) implied powers- helpful/approprate to carry out trust purpose

Front 40

TE duties owed to B's

Back 40

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

Front 41

duty of loyalty

Back 41

requires TE administer trust for benefit of beneficiaries having no other condition on mind (no self dealing)

Front 42

consequences of self-dealing

Back 42

TE surcharged and has to make good the loss

TE constructive TE as to profits

Front 43

duty to invest

Back 43

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

Front 44

duty to invest rules

Back 44

1) duty to diversify
2) no speculating
c) breach- must make good loss, profits must be affirmed by beneficiaries

Front 45

duty to earmark

Back 45

requires TE to label trust property as trust property

Front 46

CL consequenes of failure to earmark

Back 46

TE is personally liable even if no causal relationship required between failure to earmark and loss

Front 47

modern consequenes of failure to earmark

Back 47

TE personally liable only if loss was caused by failure to earmark

Front 48

duty to segregate

Back 48

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

Front 49

duty not to delegate

Back 49

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

Front 50

multiple trustees can act

Back 50

CL- only if unanimously
modern- by majority decision

Front 51

duty to account

Back 51

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)

Front 52

duty of due care

Back 52

TE must act as a reasonably prudent person dealing with his own affairs

Front 53

remedies of B for breach of duties

Back 53

1) damages
2) constructive trust
3) tracing and equitable lien on property
4) ratify transaction if good for beneficiary
5) remove TE

Front 54

CL liability in contract

Back 54

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

Front 55

modern liability in contract

Back 55

if other person to k knows TE entering in representative capacity, TE must be sued in representative capacity

Front 56

CL liability in tort

Back 56

TE sued in personal capacity, if without personal fault can get indemnification from trust assets

Front 57

modern liability in tort

Back 57

TE sued in individual capacity and is personally liable only if TE personally at fault

Front 58

modification by SR

Back 58

SR can modify trust if SR expressly reserves power to modify or revoke

Front 59

modification by court

Back 59

by cy pres or deviation power

Front 60

deviation power/doctrine of changed circumstances

Back 60

where court exercises its deviation power the court changes the administrative/management provisions of the trust (not changing beneficiaries)

Front 61

elements for courts to use deviation power

Back 61

1) unforeseen circumstances on the part of the SR
2) necessity (deviation needed to preserve trust)

Front 62

SR has power to revoke

Back 62

majority- expressly reserved in TI
minority- unless TI is expressly made irrevocable

Front 63

termination of irrevocable trusts

Back 63

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

Front 64

termination by operation of law

Back 64

passive trusts and statute of uses

Front 65

statute of uses

Back 65

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

Front 66

income for life tenant

Back 66

cash dividends, interest income, net business income

Front 67

life tenant's expenses

Back 67

paid by interest-
interest on loan indebtedness, taxes, minor repairs

Front 68

income for remainderman

Back 68

stock dividends, stock splits, net proceeds on the sale of trust asset

Front 69

remainderman's expenses

Back 69

principal part of loan indebtendess, major repairs/improvements

Front 70

adjustment power of TE

Back 70

TE can disregard above stated rules if different allocation is necessary to administer the trust fairly