Creation of an Express Trust

Question 1

What are the three main ways that an express trust is created?

Answer 1

A trust can be created in one of three ways generally:

1. Declaration of Trust by property owner (inter vivos trust): A person can create a trust by declaring that he holds the property as trustee in trust
2. Transfer of property by the settlor (inter vivos trust): A trust can be created by the transfer of property to another as trustee. The trustee takes legal title upon delivery of a deed or other document of title, or upon actual delivery of manually transferable property.
3. Testamentary Trust created by will

Question 2

How is a Declaration of Trust different from a Transfer of Property?

Answer 2

Delivery is NOT required with declaration of trust.

Question 3

What are the formal requirements for Inter Vivos Trusts?

Answer 3

1) Oral Trusts: Oral trusts may be established only by clear and convincing evidence.

2) Statute of Frauds: Most states do not require a writing for a trust of personal property.

• Writing Required for Trusts of Land: When the trust involves land, a written instrument is required under the Statute of Frauds to make the trust effective.

Question 4

What are the formalities required to create a Testamentary Trust?

Answer 4

Trust intent and the essential terms of the trust must be ascertained from one of the following:

1. The terms of the will itself.
2. An existing writing properly incorporated by reference into the will
3. The exercise of a power of appointment created by the will.

Question 5

What is a Secret vs. a Semi-Secret Trust?

Answer 5

Secret Trust: The will makes a gift, absolute on its face, to a named beneficiary. However, in reality, the gift was made in reliance upon the beneficiary’s promise to hold the gift property in trust for another.

• Extrinsic Evidence — Allowed
• Result — Constructive trust imposed in favor of intended beneficiary (if proven by clear and convincing evidence)

Semi-Secret Trust: The will makes a gift in trust but fails to name the beneficiary.

• Extrinsic Evidence — Not Allowed
• Result — Gift fails and the named trustee holds the property on a resulting trust for the testator’s successors in interest.