Trusts And Federal Estate Gift Tax: Tx Trusts

Front 1

Trust: arrangement for making gifts of property and asset management

Trustee holds legal title to assets for benefit of beneficiaries. Has all burdens of ownership (duty to manage, invest, insure, safeguard). Beneficiaries have equitable title and benefits of ownership.

Back 1

To have valid trust, settlor (grantor) delivers title to trust property to a trustee for the beneficiaries' benefit with intent to create a trust. Trust must be for a lawful purpose.

No consideration required.

Front 2

Settlor must have legal capacity:

- age 18 or over
- capacity to convey title to trustee is higher test than in wills

Back 2

Delivery requirement: does not apply to self-declaration of trust (" I here declare myself..") or testamentary trust.

Must be delivery of the subject matter of the trust, with the intent to convey legal title to the trustee.

Hint 2

Legal title to specific interest in property must be conveyed to the trustee. Subject matter must be certain and identifiable. If no trust property, there's no trust.

Front 3

Expectancy/fervant hope is not property interest. BUT future interest is a presently-owned property interest that can be used to create trust.

Back 3

But, if promise to hold property (to be received in the future) in trust is supported by a consideration. Under K law, the trust duties automatically attach when property is received.

Front 4

Trustee: must have legal capacity

Unincorporated association can't be trustee; only banks, trust companies are given trust powers in their charters, and charities as to charitable trusts only, can serve as trustees.

Back 4

Individual named as trustee most post a fiduciary bond to secure the faithful performance of her duties unless the settlor waived the requirement of a bond. HOwever, a corporate trustee doesn' thave to give bond.

Hint 4

Trustee is entitled to reasonable compensation for serving as trustee, and reimbursement for all expenses reasonably incurred in administering the trust.

Front 5

No trust ever fails for lack of a trustee

Back 5

Court will appoint a suitable successor to execute the trust. (If trust is created by will, the court will usually appoint executor named in the will, since she has already been named for one fiduciary position).

Front 6

No one can be compelled to accept fiduciary responsibilities and duties.

Back 6

Acceptance of trust office:

1) Trustee's signature
2) Acceptance by conduct (exercises trust power or performs trust duties)

Front 7

Trustee resignation

Back 7

1) Court approval upon showing that can't appropriately serve as trustee

2) Accounting: (1) property initially received; (2) receipts & disbursements; (3) property now on hand and liabilities

Front 8

If nobody named as possible beneficiary, no trust.

ex: Conveyance of land to son "JS, trustee."

Back 8

But where minor children, valid trust was created because a trustee and beneficiaries named. Stretching to avoid guardianship administration.

Front 9

If named "trustee" has no powers or active duties to perform, no trust arises.

Back 9

A trustee must owe fiduciary duties to someone.

Front 10

If trust instrument contains a spendthrift clause with respect to interest, the spendthrift clause is not valid.

Back 10

To have a spendthrift trust, you have to have a trust!

Hint 10

Spendthrift clause:

"No beneficiary shall have power to transfer his interest, nor shall such interest be reachable by a beneficiary's creditors by attachment or other legal process."

Front 11

Trustee by estoppel

Back 11

Where parties accept or ratify a person's assumption of trust duties and actions as "successor trustee" not recognized.

Person acting without accepting appointment has no authority over trust property, and can be sued for any resulting losses.

Front 12

Beneficiaries

Back 12

Noncharitable trust must have definite and ascertainable beneficiaries AND their interest must vest, if at all, no later than lives in being plus 21 years.

Oral testimony not admissible to identify beneficiaries.

Hint 12

Compare charitable trusts: can't benefit identifiable individuals; not subject to RAP.

Front 13

If trust voids because no ascertainable beneficiaries --> "resulting trust" for residuary benefiaries.

Back 13

Resulting trust is NOT a trust. It is the term courts employ when a trust fails for some reason.

Front 14

Intent to create a trust: is language precatory (non-binding suggestion) or does it enforce an enforceable obligation?

Back 14

Precatory: "wish and desire"
- request
- hope
- I would like

Hint 14

No particular words needed to create a trust: question of intent

Front 15

3 trust objectives/purposes prohibited by law

1) Calls for commission of crime
2) Calls for property destruction [capricious]
3) Unlawful condition against public policy

Back 15

Courts won't encourage divorce or total restraint on marriage. If that's the condition, then beneficiary takes free of condition.

BUT partial restraints on marriage is valid.

Cases turn on motive/intent.

Front 16

All trusts must be in writing.

Back 16

Except: transfer of personal property (ex: stocks and bonds) to a trustee other than the settlor or beneficiary coupled w/a declaration of intent to create a trust simultaneously with or prior to the transfer.

Hint 16

Trusts of land must be evidenced by a writing (SOF).