Trusts

Front 1

Private Express Trust

Back 1

Requirements
1. Intent to Create
2. Ascertainable Beneficiaries
3. Funding
- EXCEPT: Pourovers and debts
4. Valid Trust Purpose
+5. Writing (if SoF requires)

Front 2

Trust Property

Back 2

Settlor must transfer in an existing property interest
- EXCEPT: Pourovers

Front 3

Trust Beneficiaries

Back 3

Any ascertainable person or group of people
+ Includes: corporations and unincorporated associations

LIMITS:
- Class may be too big
- RAP applies

Front 4

Trust: Intent to Create

Back 4

Settlor must have a present intent to create the trust
- Precatory words not sufficient

Front 5

Timing of Trust Creation

Back 5

At Death: Must comply with Statute of Wills

Inter Vivos
1. Transfer in Trust: Third person holds property (delivery required)
2. Declaration in Trust: Settlor holds property as trustee (delivery not strictly needed)

Front 6

Private Express Trust

Back 6

Requirements
1. Intent to Create
2. Ascertainable Beneficiaries
3. Funding
- EXCEPT: Pourovers and debts
4. Valid Trust Purpose
+5. Writing (if SoF requires)

Front 7

Trust Property

Back 7

Settlor must transfer in an existing property interest
- EXCEPT: Pourovers

Front 8

Trust Beneficiaries

Back 8

Any ascertainable person or group of people
+ Includes: corporations and unincorporated associations

LIMITS:
- Class may be too big
- RAP applies

Front 9

Trust: Intent to Create

Back 9

Settlor must have a present intent to create the trust
- Precatory words not sufficient

Front 10

Timing of Trust Creation

Back 10

At Death: Must comply with Statute of Wills

Inter Vivos
1. Transfer in Trust: Third person holds property (delivery required)
2. Declaration in Trust: Settlor holds property as trustee (delivery not strictly needed)

Front 11

Trust Purpose

Back 11

Trust may be established for any legal purpose

Illegality at Creation: court tries to excise bad parts
- Else: Trust invalidated, either S or T keep funds

Illegality after Creation: Resulting trust is decreed

Front 12

Charitable Trust

Back 12

Any trust which confers a substantial benefit upon society

Creation:
1. Intent to create
2. Funding: transfer of presently existing interest
3. For a legal charitable purpose

RAP: Not applicable to a valid charitable trust

Front 13

Cy Pres

Back 13

"As nearly as possible"

Court can modify settlor's gift to charitable trust if:
1. General charitable intent behind gift
- Cy pres not applicable if intent specific
2. Mechanism given for effectuating the intent not possible

Front 14

Honorary Trusts

Back 14

Trust with no ascertainable beneficiary and no substantial benefit upon society
-> T is "on his honor" to carry out wishes of S

RAP virtually always invalidates them

Front 15

Spendthrift Trusts

Back 15

Beneficiary cannot transfer his right to future payments to income or principal and creditors cannot attach B's right to future payments

Front 16

Spendthrift Trusts: Creditor Details

Back 16

Voluntary Alienation: Not allowed

Involuntary Alienation: Not allowed EXCEPT
1. Preferred creditors
2. Attachment of surplus: based on "station in life" test
3. Self-settled trusts

Front 17

Support Trusts: Alienation

Back 17

T only required to use income as is necessary for B

Voluntary: Not allowed

Involuntary: Not allowed EXCEPT
1. Preferred creditors
2. Attachment of surplus
3. Self-settled trusts

Front 18

Discretionary Trusts: Alienation

Back 18

T has sole and absolute discretion how much and when to pay

Alienation: Not allowed
- EXCEPT: Where T has notice and decides to pay, he must pay

Front 19

Resulting Trust

Back 19

Equitable reversionary interest arising any time a trust fails

Gives property to S or S's estate

Front 20

Examples of Resulting Trusts

Back 20

1. Express trust fails (own terms, no B, illegal purpose)
2. Charitable trust fails (no cy pres)
3. Excess corpus in private express trust
4. Purchase money resulting trust (A pays B for title that is wrongly conveyed to C)
5. Semi-secret trusts

Front 21

Constructive Trusts

Back 21

An equitable decree used by courts to prevent unjust enrichment

Examples
1. T profits by self-dealing
2. Fraud in inducement/undue influence
3. Secret trust
4. Oral real estate trusts

Front 22

Trustee Powers

Back 22

1. Express Powers
2. Implied Powers: those helpful and appropriate to carry out trust purpose

Front 23

Trustee Duties

Back 23

1. Loyalty
2. Segregate
3. Invest
4. Not delegate
5. Invest

Front 24

Trustee Duty of Loyalty

Back 24

T must administer the trust for the benefit of the beneficiaries

-> No self dealing

Remedy for Breach:
1. T surcharged for loss
2. Disgorgement of T's profits

Front 25

Trustee Duty to Invest

Back 25

T must act as a prudent investor
- Common Law: each transaction scrutinized, must maximize income
- Uniform Act: consider entire portfolio

Remedy for Breach:
1. Surcharge for loss
2. Disgorge profits

Front 26

Trustee Duty to Segregate

Back 26

Trustee cannot commingle own personal funds with trust funds

Remedies
1. Removal of T
2. T liable for loss

Front 27

Duty Not to Delegate

Back 27

T can rely on professional advisors but not delegate
- EXCEPT: Modern law allows delegation to mutual fund trustees

Front 28

Duty of Care

Back 28

Trustee must act as a reasonable prudent person would in dealing with his own affairs

Remedies
1. Damages
2. Constructive trust
3. Tracing & Equitable lien
4. Ratify if good
5. Remove trustee

Front 29

Trustee Contract Liability

Back 29

Common Law: T only sued in representative capacity if contract provides that as sole means of suit
+ indemnification available

Modern Law: T must be sued in representative capacity if other knows contract entered into in representative capacity

Front 30

Trustee Tort Liability

Back 30

Common Law: T sued in personal capacity
+ indemnification available

Modern Law: T can be sued in personal capacity only if T is personally at fault

Front 31

Modification of Trusts

Back 31

Settlor: May modify if expressly given power or trust is revocable

Court:
- Cy Pres
- Deviation Power (Changed Circumstances):
1) Unforeseen circumstances
2) Necessity

Front 32

Termination of Revocable Trusts

Back 32

S must expressly reserve power to terminate
- Minority: S has power to revoke by default

Front 33

Termination of Irrevocable Trusts

Back 33

1) S and all B's agree to terminate
2) B's agree to terminate + material purposes of trust accomplished
3) Operation of Law: Corpus is property and trust is passive
4) Trust ends by its own terms

Front 34

Allocation of Income

Back 34

To Life Tenant:
1. Cash dividends
2. Interest income
3. Net business income

To Remaindermen:
1. Stock dividends
2. Stock splits
3. Net proceeds on sale of a trust

*** May be modified under T's adjustment power

Front 35

Allocation of Expenses

Back 35

To Life Tenant:
1. Interest on loan indebtedness
2. Taxes
3. Minor repairs

To Remaindermen:
1. Principal on debt
2. Major repairs or improvements

*** May be modified under T's adjustment power