Creating A Trust Flashcards
Elements to create a trust
A valid trust requires VIP BTC
- Valid Trust Purpose
- Intent
- Property
- Beneficiaries
- Trustee
- Creation (Grantor makes it)
Ascertainable Beneficiaries
The beneficiaries of a private trust must be ascertainable so that the equitable interest can be transferred automatically by operation of law and directly benefit the person.
The settlor may refer to outside writings or acts of independent significance when identifying trust beneficiaries. An indefinite class is valid such as my friends or unborn children. It is possible to create a trust for the benefit of a child who is not born yet. It is also possible to have a class gift. A charitable trust is also ok.
Intent
The settlor must intend to make a gift in trust. It can be manifested in writing, orally, or by conduct. Manifestation of intent must occur prior to or simultaneously with transfer of property. Precatory (I wish) words are not enough.
Invalid Legal Purpose
If the purpose of the trust is against public policy the court might strike the invalid provision.
i.e. A trust provision that restrains or seeks to prohibit the beneficiary of a trust from getting married might actually violate public policy.
Property
A valid trust must be funded. Therefore, it must contain some property that was owned by the grantor at the time the trust was created and was at that time transferred to the trust or to the trustee. Any property interest, including real property, personal property, money, intangibles, partial interests, or future interest (whether vested or contingent) will suffice if DESCRIBED WITH REASONABLE CERTAINTY.
Intervivos trust with a pour over will is allowed, when a grantor created an intervivos trust and upon his death that trust will actually pour over all the assets from the will into the trust and the trust will govern is legal. Pour over provisions are legal.
Trustee
A trustee holds legal interest or title to the trust property. If there is no named trustee, the court will appoint one. The trust will not fail if there is no named trustee.
Valid Trust Purpose
A trust can be created for any purpose as long as it isn’t illegal or contrary to public policy. If one of the trust terms violates public policy, alternative terms will be honored, or if none, term will be stricken.
