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28 Cards in this Set
- Front
- Back
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Charitable trusts
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must have indefinite beneficiaries, may be perpetual and cy pres applies
RAP does not apply unless shift between private and charitable uses cy pres--when purpose is impractical, ct selects alternative honorary trusts |
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transfer of beneficiaries interest
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may freely transfer interest
spendtrift trusts--preclude beneficiary of transfering his interest or creditors of reaching it restraint on involuntary alienation only is invalid discretionary trusts--beneficiaries creditors or assignees have same rights as beneficiary support trusts--cannot be assigned or reached by creditors |
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Modification and termination of trust
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in most states, settlor can't revoke or amend unless he expressly reserved that right
beneficiaries--all agree and won't frustrate material trust purpose trustee has no power except as provided in instrument judicial-when pupose is impossible or illegal doctrine of changes circumstances |
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Powers of the trustee
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expressly conferred and plus powers implied that are necessary to accomplish trust purposes
joint trustees must exercise power by unaimous agreement. in majority of states, any power in 3 or more trustees..need majority normally no implied power to borrow money, or to mortgage or otherwise encumber the property |
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standard of care required of trustee
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must exercise that degree of care, skill and caution that would be excercised by a reasonably prudent person in managing her own property
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duty of loyalty of trustee
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trustee ows duty of undivided loyalty to the trust and its beneficiaries
cannot sell or buy assets even if price is a fair one may not sell property of one trust to another may not borrow trust funds nor loan her personal funds cannot use trust assets to secure personal loan trustee cannpt invest in its own stock |
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Beneficiaries rights in case of prohibited transaction
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1. set aside the transaction
2. recover any profit 3. affirm the transaction |
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other duties of trustee
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1. no commingling
2.. Uniform Prudent Investor Act--may delegate investment & management functions that a prudent trustee of comparable skills could properly delegate under the circumstances 3. duty to defend trust from attack 4. duty to preserve trust property and make it productive |
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Uniform Prudent Investor Act
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1. a trustee must exercise reasonable care, skill and caution when investigating and mananging trust assets
investment decisions must be evaluated in context of entire portfolio and as part of overall investment strategy can invest in any type of investment provided trustee acts prudently must diversify instruments of the trust unless reasonably determines better off without diversification |
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Summary of the trustee's fiduciary obligation
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ask yourself
1. was the act one that the trustee was authorized to perform by the instrument, by state law, by implication? 2. if the act was proper to perform, did the trustee do so with the appropriate care, skill and caution? |
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Liabilities of the trustee
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removal, lost profits, interest from time of breach
must sue within reasonable time or stopped by doctrine of laches |
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Will substitutes
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Life insurance trusts are upheld
totten trust accounts are upheld Uniform Transfers to Minors Act (UTMA)--custodianship is not a trust; legal title is in minor, not custodian |
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trustee liable for the acts of others
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agents--if she (i)directs, permits, or approves the act, fails to compel agent to address wrong, (ii) improperly selects or improperly delegates, (iii) fails to excercise reasonable supervision of agent
co-trustees--(i) approved or participated in breach, concealed or failed to take steps to correct breach, (iii) improperly delegated athority to co-trustee predecessor trustees--(i) knew or should have known and fails to redress, or (ii) was negligent in determing when property should have been delivered to her |
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trustees liablity to third parties
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K liability--entitled to reimbursement only if acted within her powers and reasonably
tort liability--idemnification only if not personally at fault or tort occurred as mornal incident to activity in which trustee properly engaged |
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liability of third parties to trust
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a BFP cuts off equitable interests of beneficiaries
direct suit is not allowd by beneficiaries; only trustee unless trustee participated in the breach, has left juridiction or fails to sue a 3rd person liable in tort or K |
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Uniform Principle and Income Act
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gives the trustee an adjustment power to reallocate investment portfolio return.
authorizes the trustee to characterize items such as capital gains, stock dividends, etc., as income if the trustee deems it necessary to carry out the trusts purposes |
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Allocation rules
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cash dividends treated as income unless characterized as capital gains for federal tax purposes
stock dividends=principle proceeds from life insurance policy=principle unless insures trustee against certain type of loss, then =income patents and copyright=10% income, 90% principle deferred compensation= same as patents |
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Allocation of Expenses
Expenses charged to income |
one-half of regular compensation of trustee or any other person providing investment, advisory, or custodial services
one half for accountings, judicial proceedings entire cost of ordinary expenses and insurance premiums covering loss of a principle asset |
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Allocation of Expenses
Expenses charged to principle |
remaning one half of the compensation of trustee and any person providing investment, advisory, or custodial services
remaining one half for accountings and jusdicial proceedings payment on the principle of a trust debt expenses of a proceeding that primarily concern the principle estate taxes enviornmental matter |
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Will substitutes
revocable inter-vivos trusts |
the test for distinguishing a trust from a will is whether the transfer creates some present gift, even if that gift is of a future interest subject to divestment
usually upheld even when settlor is trustee as well as life-tenant with powers to revoke as long as third parties notified though words or actions of settlors intent to make trust may be used for convenient management of assets, to plan for possibility of incapacity, avoid probabte costs and delays |
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Resulting Trusts
Purchase Money Resulting trust |
is presumed whenever beneficiary furnishes the -c for the acquisition of real property or personal property, but with beneficiaries consent, title is taken in the name of the trustee
the -C must be for the purchase of the property burden of proof on beneficiary to prove he supplied -c by clear and convincing evidence once X proves -C, trust is presumed by Y can rebut by showing no trust was intended |
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Resulting trusts
where parties closely related |
when party paying -C is parent, grandparent or husband of trustee, a gift is presumed
split of authority when beneficiary is wife of trustee as to whether a gift or trust normal presumtion of trust if uncle, aunt, brother/sister, child or grandchild is person receiving title |
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Resulting trust
Unlawful purpose |
a trust cannot be implied though recent cases suggest implied trust is still proper when beneficiaires misconduct is slight compared to the unjust enrichment trustee will enjoy if permited to keep the property
no trust when transferee obtained title wrongfully (fraud) |
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Resulting Trusts
on failure of express trusts |
if express trust is void or unenforceable or the beneficiary is dead or can't be located, the express trust terminates and the settlor becomes the beneficiary of the resulting trust
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Resulting trust
when not implied |
the trust instrument specifically provides for disposition of property when the trust has failed or been completed
the settlor was given -c for his original transfer in trust cy pres is applicable in cases of charitable trusts resulting trust IS implied when the trust purpose is satisfies and some res remains |
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Constructive trusts
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is not really a trust but a flexible equitable remedy to prevent unjust enrichment resulting from the wrongful conduct, such as fraud, undue influence, or breach of a fidicuiary duty
the construtive trustee's only duty is to convey the property to the person who would have owned it but for the wrongful conduct |
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constructive trusts
arising from homicide |
if one person kills another and is convicted of murder or manslaughter, he holds any property he acquires from the victim by will or intestacy as constructive trustee in favor of whomever would have taken the property had the killer predeceased the victim
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Constructive trusts
where killer and victim hold property in joint tenancy |
kiler obtains full legal title to the property
however, he holds as least one-half interest as constructive trustee for the estate of the victim |
