Creation of Trusts Flashcards
What are the three classifications of trusts?
(1) Express Trust
(2) Resulting Trust
(3) Constructive Trust
What is an express trust?
A trust that is intentionally created by a person
What is a resulting trust?
A trust that holds the remaining property after a trust’s purpose can no longer be served
What is a constructive trust?
An equitable remedy used by courts to prevent unjust enrichment when one person is legally entitled to property, but equity requires the property go to another person
How does a constructive trust work?
The court will give legal title to the first person as a trustee and require the first person to distribute the property to the second person, who should own the property under equitable principles
What are the requirements for formation of an express trust?
(1) Intent
(2) Valid purpose
(3) Competent settlor
(4) Property
(5) Trustee
(6) Identifiable beneficiary
What are the factors courts will consider in distinguishing trusts and gifts with precatory instructions?
(1) The property being transferred
(2) The beneficiaries
(3) The language of the transfer
What are the five types of express trusts?
(1) Inter vivos
(2) Testamentary
(3) Revocable
(4) Irrevocable
(5) Charitable
What is an inter vivos trust?
A trust that is created when a settlor transfers property to someone to hold in trust during the settlor’s life
What is a testamentary trust?
A trust created by will
Under the UTC, is a trust presumed to be irrevocable or revocable?
Revocable
How is an irrevocable trust created?
(1) A testamentary trust
(2) A revocable trust becomes irrevocable upon the settlor’s death
(3) Created by a settlor during the settlor’s life
What is a mandatory trust?
A trust containing instructions that mandates when a trustee must make distributions
What is a discretionary trust?
A trust in which the trustee has discretion as to when distributions should be made
How does a protective trust work?
It’s a mandatory trust that becomes discretionary upon a creditor’s attempted attachment
What is a spendthrift provision?
A provision that bars the beneficiary from assigning or selling the beneficiary’s interest and prevents creditors from attaching to the interest
Under the UTC, when can a creditor compel distribution subject to a discretionary standard?
When:
(1) the creditor is a child, spouse, or former spouse with a support order;
(2) the trustee failed to comply with the standard of distribution or abused their discretion;
(3) the amount is equitable under the circumstances, and
(4) the amount is not more than the amount the trustee would have been required to distribute
What creditors are excepted from spendthrift provisions?
(1) children or former spouses with support orders
(2) creditors who provide necessities
(3) lawyers who helped the beneficiary protect the beneficiary’s interest
(4) state and U.S. government
(5) some tort creditors
If a trustee resigns, for what actions are they liable?
Only for actions or omissions that occurred while they were still the trustee
What is a purpose trust?
A trust with a noncharitable purpose that lacks an identifiable beneficiary
