Trusts

Front 1

kinds of trusts

Back 1

express and operation of law

Front 2

express trusts 2 types

Back 2

private charitable

Front 3

private trusts 5 areas of concern for express

Back 3

validity, administration, accounting, transfers of interest, modification/termination

Front 4

express charitable trusts issues -2

Back 4

charitable purpose - no ascertainable beneficiaries

Front 5

2 types of trusts formed by operation of law

Back 5

resulting and constructive

Front 6

2 kinds of express operation of law trusts that are resutltng no constructive

Back 6

failed trust and purchase money trust

Front 7

trusts players - anatomy

Back 7

Settlor (a) ->Trustee T and Corpus C -> B (Income) or ->c (remainder)
"Pay income to B for B's life, remainder to C."

Front 8

2 kinds of express operation of law trusts that are resutltng no constructive

Back 8

failed trust and purchase money trust

Front 9

trusts players - anatomy

Back 9

Settlor (a) ->Trustee T and Corpus C -> B (Income) or ->c (remainder)
"Pay income to B for B's life, remainder to C."

Front 10

2 Major Issues in Trusts

Back 10

Validity and Adminstration

Front 11

5 elements of trust validity

Back 11

Intent, Identifiable Corpus, Ascertainable Beneficiaries, Proper Purpose, Mechanics of creation

Front 12

2 adminstration issues in trusts

Back 12

Trustee's Powers and Liability

Front 13

two major issue areas in Trust administration Liability

Back 13

Trustee to Bs Trustee to 3rd Ps and 3p to Trust

Front 14

3 minor issues in trusts

Back 14

accounting, transfers of interest, modification and termination

Front 15

accounting issues in trusts 2

Back 15

income earned and expenses paid

Front 16

transfers of interest areas - 3 different kinds of trusts with respect to transferability

Back 16

Freely transferable, Discretionary trusts and spendthrift trusts

Front 17

who can modify or terminate a trust

Back 17

Settlor or Bs

Front 18

Rules for intent to form trust - general rule and recurring problems

Back 18

present intent to transfer - problems precatory or wishy washy language or Settlor retains too much control

Front 19

intent prolems in trust formation

Back 19

Settlor has presnt intent to transfer

Front 20

factors to determine settlor intent in trust formation - precatory language issue

Back 20

how precise instructions, whether B natural object of bounty of settlor, settlor previously provided support to B

Front 21

is extrinsic evidence allowed to relieve ambiguity in settlor languge

Back 21

yes

Front 22

Settlor's involvement in handling trust ends when?

Back 22

at formation

Front 23

indentifiable trust corpus general rule

Back 23

property identifiable and segregated and transferred to trust

Front 24

indentifiable trust corpus recurring problems

Back 24

expectancy v future interest and debt - who is debtor

Front 25

indentifiable trust corpus exprectancy v future interest - explain difference

Back 25

"whatever property may receive" - expectancy because property fails concnurrent transfer
"X dies leaving Bacre to Y for life, remainder to A. B declare himself trustee for B" Valid future interest

Front 26

indentifiable trust corpus - problem who is debtor - is 3rd party valid

Back 26

if 3rd party can be sued - debtor can be sued
X owes A money:
(1) A declares himself trustee for B Church over the debt = valid
(2) A requests X to hold money in trust for B Church <> valid becasue no one independent to sue debtor - when trustee is debtor

Front 27

validity of trust analysis - who ascertainable Bs - private trusts

Back 27

any person or entity who is capable of taking title to real or personal property

Front 28

may settlor be both creator and B of trust

Back 28

yes

Front 29

Trustee B of trust

Back 29

as long as there is another trustee

Front 30

class gift - trust identifiable?

Back 30

ok if unascertainble at creation - must be ascertainable they come into possession

Front 31

trust class gift rule children

Back 31

one child must be alive at formation then other children are added

Front 32

validity of trust analysis - who ascertainable Bs to settlor's employees at death

Back 32

ok if testimentary trust but inter vivos trust - facts of independent significance like who would be employees at time f death which is time of possessionvalidity of trust analysis - who ascertainable Bs

Front 33

validity of trust analysis - who ascertainable Bs - relatives

Back 33

too indefinite of a class - gifts fail and resorts back to settlor or settlor's estate - court could impose meaning

Front 34

validity of trust analysis - who ascertainable Bs - remainder to friends

Back 34

way too ambiguous - goes back to settlor esate or settlor

Front 35

when disussing ascertainable abs in trusts also consider

Back 35

whther it was a discretionary power of appointment

Front 36

does a charitable trust require ascertainable Bs

Back 36

no

Front 37

proper purpose for a trust - what 3 things make a trust invalid

Back 37

illegality, crime or tort, or contrary to public policy

Front 38

what is an example of improper purpose for trust formation

Back 38

violated Public policy like forbidding to marry, is illegal on its face or would involve the trustee in commission of crime or tort

Front 39

effect of improper purpose of a tort

Back 39

only invalidiate the improper parts but leaves in tact provisions or instructions that are proper

Front 40

effect of entire trust being for improper purpose

Back 40

whole trust is invalid

Front 41

improper purpose in trust in condition subsequent

Back 41

if B fails to leave wife in one year as a cnodition subsequent - the condition is invalid and is stricken and B gets to keep his property - gift w/o condition

Front 42

proper purpose for a trust effect of improper purpose as condition precedent

Back 42

When B leaves his wife - violates public policy and courts will try to discern settlor intent - gray area usually if settlor would ahve waned then B would etc

Front 43

what are proper and improper purposes for charitable trusts

Back 43

benefit to community required otherwise improper - if mixed the court will split or if cannot treated as a private

Front 44

cy pres?

Back 44

purpose cannot be accomplished in charitable trust

Front 45

3 problem areas of mechanics of trust creation

Back 45

manner of creation, need for writing, need for trustee

Front 46

3 valid manners of creating a trust

Back 46

inter vivos declaration, inter vivos transfer, testimentary transfer

Front 47

inter vivos declaration for trust

Back 47

I declare I hold property in trust for

Front 48

inter vivos trust

Back 48

settlor conveys corpus to trustee

Front 49

need for trustee under inter vivos declaration

Back 49

no as long as declarer segregates and identifies corpus

Front 50

need a trustee for inter vivos transfer

Back 50

court can assign trustee so no

Front 51

what happens if trustee can no longer take title to corpus - capactiy problem in inter vivos transfer trust

Back 51

court assigns new trustee

Front 52

two types of problems that come up after intervivos transfer of corpus

Back 52

capacity - no longer able to take title and delivery - no actual delivery to trustee - look for constructive delivery

Front 53

what is constructive delivery

Back 53

strict instructions by settlor where corpus was not trasnfered for some reason

Front 54

failure to designate trustee in testimentary will fatal to trust

Back 54

no court can appoint

Front 55

need for a writing in an inter vivos declaration

Back 55

same rules as inter vivos transfer

Front 56

need for writing in intervivos declaration or transfer - personal property

Back 56

no writing - but possible parole evidence problem if there is a writing

Front 57

need writing for inter vivos transfer or declaration - real property general rule and oral trusts to transfer land

Back 57

generally writing required but some oral trusts may survive under part performance

Front 58

oral trust involvng land - who keeps the land if oral instructions cannot be enforced

Back 58

trustee gets to keep the land except if trustee defrauded Settlor or settlor and trustee were in confidential relationship

Front 59

settlor and trustee were in confidential relationship and oral trust involving land

Back 59

trustee in constructive trust

Front 60

need for writing inter vivos transfer or declaration - personal property later tramsmuted to real prop

Back 60

no writing required

Front 61

need for writing inter vivos transfer or declaration - personal property used as cash to buy real prop under instruction

Back 61

writing required

Front 62

need for writing inter vivos transfer or declaration - testimentary trust areas of concern

Back 62

secret trust, semi-secret trust, and pour over trust

Front 63

need for writing inter vivos transfer or declaration - testamentary secret trust
majority and minority

Back 63

provision in will A leaves $100,000 to T if through extrinsic evidence that T should hold $ for other party - majority uphold - minority T takes out right

Front 64

what is trust with language - "as we agreed" that does not specify agreement

Back 64

semi-secret trust - still requires extrinsic evidence to fill in gaps - secret trust no hint -

Front 65

semi-secret trust upheld by majority - minority

Back 65

majority no so B takes not subject to extrinsic agreement but minority upheld
WEIRD because secretr trusts are opposite

Front 66

what is a pour over trust

Back 66

really a pour over will - inter vivos trust followed by will devises property - trust amended - settlor dies - third step causes problem

Front 67

what is incorporation by reference and when is it valid

Back 67

instructions can be incorporation because amendment was not in existence when will was formed

Front 68

when can subsequent amendment be incorporated - gift in will

Back 68

when it is an act of independent significance - split traditional will amended only because of will then gift is no good, but modern majority syays where trust was executed before a will and the will adds property to trust a later amendment to trust will not make gift invalid

Front 69

4 steps for pour over trust and effect

Back 69

intervivos trust, execute a will that devises property to trust, amends the trust, dies
traditional the step 3 gift fails unless an act of independent significance but modern majority step three gift is valid

Front 70

3 steps to analyzing trsutee's powers

Back 70

express, how exercised, and implied

Front 71

trustee's powers - 2 sources of power

Back 71

express and implied

Front 72

trustee's powers - implied powers - appropriate 3 and not 2

Back 72

power of sale, power to lease, power to incur reas expenses, not power to borrow or mortgage, power to operate business

Front 73

trustee's powers - rules for how trustee's can exercise powers - multiple trustees

Back 73

must act jointly and unanimously with no delegation but lots of vicarious liability

Front 74

trustee's powers - rules for how trustee's can exercise powers - trustee hire experts ok

Back 74

yes

Front 75

trustee's powers - rules for how trustee's can exercise powers - given discretion

Back 75

must be exercised in good faith

Front 76

trustee liability - 3 areas

Back 76

to Bs, to 3ps, 3p to trust

Front 77

trustee liability to Bs 3 things to consider

Back 77

Bs would be Ps serving police function
duties, defenses, remedies

Front 78

trustee liability 2 areas that can cause breach?

Back 78

follow instructions and fiduciary duty of loyalty

Front 79

trustee liability breach of loyalty 3 areas?

Back 79

avoid self dealing, keep accurate records and render reports, act with care skill and prudence

Front 80

trustee liability self dealing breach - is good faith relevant?

Back 80

no

Front 81

trustee liability self dealing breach 2 rules and 2 exceptions

Back 81

no trustee or spouse derive personal advantage, compensation can be usual employee and when trustee has certain skills that entitle compensation for extraordinary skills like acting as lawyer for trust

Front 82

trustee liability self dealing breach - acting with care , skill and prudence

Back 82

segregate and earmark corpus, no commingling, designated as held in trust i.e. title conforms to T in trust for A's trust - T does not own prop

Front 83

trustee liability care skill and prudence 3 elements

Back 83

segregate earmark, personally perform services, conserve and make productive

Front 84

trustee liability care skill and prudence - personally perform

Back 84

example of sending real estate agent out to buy a house - no price etc - must personally perform duties

Front 85

trustee liability care skill and prudence - prudent investor

Back 85

knowing what prudent investor would know at time employ prudent man rules maj prudent investor - min actual lists of prudent investment

Front 86

trustee liability care skill and prudence - - conserve and make productive require diversification and interst bearing

Back 86

yes

Front 87

trustee liability defenses 4

Back 87

exculpatory clause, consent, no offset for profit v loss, laches or SOL

Front 88

trustee liability defenses - exculpatory clause

Back 88

not for intentional breach or recklessness but is a defense for negligence

Front 89

trustee liability defenses consent requirements

Back 89

B legally competent, full knowledge of facts and rights, consent not induced by trustee's improper conduct

Front 90

trustee liability defenses consent through silence

Back 90

no

Front 91

trustee liability defenses consent more than one B

Back 91

if B consents but C does not - good defense for B but not C

only consenting B is barred

Front 92

trustee liability defenses consent try to offset losses from profits

Back 92

trustee cannot average P and L

Front 93

trustee liability defenses consent - laches

Back 93

equitable defense of unreasonable delay - good defense

Front 94

trustee liability defenses consent - SOL

Back 94

good defense if the period ran

Front 95

trustee liability damages measure

Back 95

loss of profits and what could have been earned

Front 96

trustee liability damages also called

Back 96

surcharge

Front 97

trustee liability damages offset breaches distinct and non-distinct breaches

Back 97

distinct no offset but parcel bought and divided with profit and loss on individual sales - trustee can avergage so liable for net loss

Front 98

trustee liability damages recission?

Back 98

improper contract - B can get contract set aside

Front 99

trustee liability damages removal under two circumstances

Back 99

either under trust terms or good cause

Front 100

trustee liability damages removal - what is good cause

Back 100

more than mere breach

Front 101

trustee liability 3rd parties under contract

Back 101

trustee is primarily liable and is liable for breach

Front 102

trustee liability 3rd parties under contract - can trustee get indemnity or reimbursement

Back 102

yes if contract was entered into properly and breach was not result of trustee's breach of duty

Front 103

trustee liability 3rd parties under tort - can trustee get indemnity or reimbursement

Back 103

yes if not personally at fault for causing injury

Front 104

trustee liability 3rd parties under tort

Back 104

trustee is primarily liable including respondiat superior

Front 105

trustee liability 3rd parties suing trust directly

Back 105

directly against trust if extremely difficult to sue trustee and trustee is entitled to indemnity or reimbursement

Front 106

when is 3rd p liable to trust 3 categories

Back 106

BFP - w/o knowledge of trust BFP is not liible to trust,
donee - innocent P who knows trust but not breach = not laible for damges and may have to return property,
co-breachor is liable and recover damages and return of property

Front 107

trusts accounting rule to keep in mind

Back 107

when in doubt the trustee should apportion income and expenses

Front 108

trusts accounting - who and how to allocate income earned - 3 points in time to allocate

Back 108

during probate, during trust admin , and near income B death

Front 109

trusts accounting - who and how to allocate income earned during probate - after testator dies but before probate

Back 109

in testamentary trusts - residue for estate held in trust- income to B for B's life , remainder to C - so B gets all the income during this period

Front 110

rusts accounting - who and how to allocate income earned during probate with no longer property to set up trust
after testator dies but before probate

Back 110

50K earns $5k interest $50K debt - nothing for remainderman C - so 5K interest, Majority gives all income to B income beneficiary and minority gives 5K to remainderman C

Front 111

trusts accounting - who gets income earned during admin of trusts - 3 categories to consider

Back 111

dividends in shares and cash, no productive property duty to sell, duty to sell wasting proerty

Front 112

trusts accounting - who gets income earned during admin of trusts - who gets dividends in shares and in cash

Back 112

remainder man gets principal but paid in cash treated as income and given to income B B, paid in stock treated as principal and goes to C remainderman

Front 113

trusts accounting - who gets income earned during admin of trusts - duty to sell non productive property for income for income B

Back 113

yes - except where trust document specifies otherwise

Front 114

trusts accounting - who gets income earned during admin of trusts - duty to sell wasting asset for C's benefit - produces income but eats value - income B happy such as mined minerals

Back 114

yes - unless trust doc specifies otherwise

Front 115

trusts accounting - income generated near income B's death - dividends
on 6/1 corp declares cash dividen but on 6/5 B dies - what happens to income if record date was 6/10 and what happens if no record date

Back 115

record date 6/10 C/remainder man get income because he is holder on record date - no record date declaration date rules so B income B gets dividend

Front 116

trusts accounting - if income B dies after rental is due - B dies on 6/5 and rent was due on 6/1 who gets income

Back 116

B - remainder man would get is rent was due on 6/6

Front 117

rusts accounting - if income B dies while interest is accruing - who gets

Back 117

interst accrues daily - so income B named B gets interest up to and including date of death and C remainderman gets income from day after death forward

Front 118

trust accounting - what expenses are charged to income and principal - repairs repairs - ordinary, taxes, or extraordinary

Back 118

ordinary repairs to income, extraordinary like earthquake charged to principal

Front 119

trust accounting - what expenses are charged to income and principal for improvements both temporary and permanent

Back 119

temp are charged to income because it does not benefit remainderman so trustee must set aside portion from income each year to amoritize the cost but permanent charged to principal

Front 120

trust accounting - what depreciation are charged to income and principal both where (1) trustee buys from cash in corpus and where (2) initial corpus was the building

Back 120

1 trustee must set aside a portion of income each year for depreciation and (2) no deduction required

Front 121

3 forms of trust - transferability

Back 121

freely reansferable, discretionary and spendthrift

Front 122

rules for transfer in freely transferable trust both voluntary and involuntary

Back 122

voluntary is freely transferable so B gets whatever - look out for SOF writing requirement - but involuntary transfers such as to creditors can attach whatever B owns

Front 123

rules for transfer in discretionary trust before and after discretionary act

Back 123

before a creditor cannot take because trustee has not exercised discretion but after the property is in B hands and both voluntary and involuntary transfers are allowed

Front 124

rules for transfer in spendthrift trust - characteristics, effect, and limits

Back 124

effect= creditors cannot attach a valid ST trust but once property gets to B hands creditors can take

splits on limits - some don't recognize ST - some limit to income B - some limit amounts to include only amount of B support

Front 125

must a spendthrift trust prohibit both voluntary and involuntary transfers in order to remain valid

Back 125

yes

Front 126

rules for transfer in spendthrift trust for special creditors who are they and what is limited

Back 126

govt for back taxes, spouses/children enforcing support judgment and creditors who supplied neceesaries

Front 127

trust modification by settlor permitted? 2

Back 127

only under reserve power to revoke or reserved power to amend - power to revoke includes power to amend

Front 128

trust modification by settlor allowed in no reserved power ?

Back 128

no power to modify

Front 129

trust modification by trustee or B
admin

Back 129

under changed circumstances if settlor did not anticioate and enforcement of original terms substantially impairs trust purpose then trustee can be authorized by court to change

Front 130

trust modification trustee or B of dispositive terms - how property is distributed

Back 130

majority cannot min can change

Front 131

trust termination private trusts by settlor?

Back 131

maj is presumed irrevocable unless the power was reserved so cannot terminate but minoruty is presumed opposite so can terminate

Front 132

trust termination private trusts by trustee

Back 132

yes under duty to conform to terms

Front 133

trust termination private trusts by Bs

Back 133

under consent by all yes unless the trust purpose is violated such as a spendthrift trust
watch for unborn class some cannot consent

Front 134

trust termination charitable trusts by failure of purpose? not enough money or disease gets cured

Back 134

failed trust property goes back to settlor or settlor's estate unless where trustee had a general charitable intent then invoke cy pres - follow general charitable purpose so that court allows purpose to be altered

Front 135

trusts created by operation of law - 2 types

Back 135

failed express trusts and purchase money resulting trusts

Front 136

trusts created by operation of law - failed trust effect

Back 136

corpus goes back to settlor or settlor's estate

Front 137

trusts created by operation of law - purchase money result trust how created

Back 137

buyer gets title paid for by a 3P
a buts car from B tells B to transfer title to T

Front 138

trusts created by operation of law - purchase money result trust but what if buyer did not intent to give property to 3rd P - what must be done

Back 138

if A can show A paid money then a presumption is that a purchase money resulting trust was created - if proven burden shifts for presumption rebuttal - if rebutted then T holds property free and clear but is T fails then T holds title in trust

Front 139

trusts created by operation of law - constructive trusts why? in what circumstances

Back 139

wrongful conduct resulting in unjust enrichment as a remedy