2. Creation of Express Trusts Flashcards
What is a testamentary trust?
A testamentary trust, established by a will, requires the settlor’s death and must meet the Statute of Wills criteria to be valid.
If no beneficiary interest is created before the settlor’s death, any intended inter vivos trust is considered testamentary.
When is a testamentary trust considered invalid?
A testamentary trust is invalid if the beneficiaries, trust property, and purposes cannot be determined from the will or referenced instruments.
What is an inter vivos trust?
An inter vivos trust requires a present capacity to convey the trust.
Section B: Required Elements
What are the required elements for the creation of a private express trust?
A trust is valid in Georgia if it meets the following requirements:
- Settlor with Capacity – The settlor must have legal capacity to create a trust.
- Intent to Create a Trust – The settlor must intend to create a trust (manifested by words, conduct, or writing).
- Definite Beneficiary – The trust must have an ascertainable beneficiary (unless it is a charitable trust).
- Trustee – The trust must have a trustee (though failure to designate one will not invalidate the trust, as a court can appoint one).
- Trust Property (“Res”) – The trust must have specific, identifiable property.
- Valid Purpose – The trust must be created for a lawful purpose and must not violate public policy.
Settlor with Capacity
What is the testamentary capacity required by a settlor for a testamentary trust?
Testamentary capacity requires freedom from fraud, undue influence, or mistake that would vitiate the will.
Present Intent and Formalities;
What is Present Intent in the context of trust creation?
The settlor must intend to create an immediate trust, not contingent on future events, with clear intent and specified trust terms.
Does precatory language transferring upon a “wish”, “hope” “request” or “desire” create a trust?
No, precatory language does not ordinarily create a trust as it does not impose enforceable duties upon the transferee.
Words otherwise precatory in nature will create a trust only if they are sufficiently imperative to show a settlor’s intention to impose enforceable duties on a trustee and if all other elements of an express trust are present.
Formalities
What are the two writing formalities for express trusts in Georgia?
All express trusts must be:
1. In writing
2. Signed by the settlor or an authorized agent.
How will a court hear parol evidence regarding the construction of an express trust?
The court may hear parol evidence of the circumstances surrounding the settlor at the time of execution to explain ambiguities.
Specific Trust Property(the trust res)
What is the trust res?
The trust res is identifiable property that the settlor can convey at its creation, described clearly or ascertainable with certainty.
Can a trust be created in a nontransferable tort claim?
No, a trust cannot be created in a nontransferable tort claim.
Must the property be in existence at the time the trust is conveyed?
Yes, the property must be in existence.
Can the property in a trust be a contingent interest?
Yes, it may be a contingent interest but not a mere expectancy.
Reasonable Ascertainable Beneficiary
What is a beneficiary in the context of a trust?
A beneficiary is a person for whose benefit property is held in trust, including vested or contingent, born or unborn, ascertained or unascertained beneficiaries.
Class Gifts
Can members of a definite class of persons be beneficiaries of a trust?
Yes, as long as the class is sufficiently defined and the identities of the individuals are ascertainable.
Co-Beneficiaires
What happens if one beneficiary of a trust dies?
The surviving beneficiary or beneficiaries receive the deceased beneficiary’s share of the income until the last survivor dies, unless stated otherwise by the settlor.
A Trustee
What happens if a trust has no appointed trustee?
A trust will not fail for lack of a trustee; the court will appoint one.
True or False: The trust does not become invalid just because one of the trustee is also a beneficiary.
True.
Trustee Duties Specified with Duties
What is the requirement for a trustee’s duties?
Trustees must have duties specified in writing or provided by law.
Trusts cannot be created by means of some oral arrangement or agreement.
Proper Trust Purpose
What is a proper trust purpose?
A private express trust can be created for any purpose that is not illegal.
Section C: Appointment, Compensation,and Removal of Trustees
What are the settlor’s powers to appoint a trustee or others?
The settlor may appoint a trustee or may grant that power to others, including trust beneficiaries.
How are vacancies filled in a trust?
Vacancies will be filled as provided for in the trust instrument.
Otherwise, the court, on petition of an interested person, may appoint any number of trustees consistent with the intention of the settlor and the interests of the beneficiaries.
Does a trustee appointed as a successor trustee have all the authority of the original trustee?
Yes.
Acceptance of Trustee
Is Acceptance of the trust by the trustee necessary to make a person a trustee?
Acceptance of the trust by the trustee is necessary to make a person a trustee, but acceptance may be by acts, as well as words. Once accepted, the trustee may not decline the trusteeship.
how does a person designated as trustee accept the trusteeship?
In general, a person designated as trustee accepts the trusteeship by substantially complying with a method of acceptance provided in the trust instrument.
What if the trust instrument doesnt provide a method for a trustee accept the trusteeship?
if the trust instrument does not provide a method or the method provided is not expressly made exclusive, a person designated as trustee accepts the trusteeship by:
1. accepting delivery of the trust property;
2. exercising powers; or
3. performing duties as trustee; or
4. otherwise indicating acceptance of the trusteeship.
Compensation
What is the trustee’s entitlement to compensation?
A trustee is entitled to receive reasonable compensation for the services rendered and to reimbursement of expenses incurred.
How are trustees compensated?
Trustees will be compensated in accordance with either the trust instrument or any separate written agreement between the trustee and the settlor.
Reimbursement
How are trustees reimbursed?
A trustee will be entitled to reimbursement out of the trust property for reasonable expenses that were properly incurred in the administration of the trust.
Resignation
How can the Trustee resign from the trust instrument?
In general, once a trustee has accepted the office, the trustee can resign only in the manner and under the circumstances described in the trust instrument.
How can the trustee resign by the permission of the court?
A trustee may resign with court approval if all qualified beneficiaries (or their guardians/conservators) agree in writing. If unanimous agreement isn’t reached, the trustee can petition the court to resign by demonstrating:
- Inability to continue due to age, illness, or similar reasons.
2.Unanticipated burdens making the role unreasonably difficult. - Conflicts with beneficiaries that harm the trust’s best interests.
- The resignation will substantially benefit the trust.
- Co-trustees can continue without detriment to the trust.
- The resignation won’t disadvantage the trust.
Under what conditions can a trustee be removed?
A trustee can be removed:
* In accordance with the provisions of the trust instrument
* Upon petition to the court by any interested person showing good cause.
