Express and Remedial Trusts Flashcards

1
Q

How is an express trust created?

A

By the expressed intention of the owner of the property to create a trust relationship with respect to the property.

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2
Q

What are the two types of express trusts?

A

Private express trusts and charitable trusts.

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3
Q

What law applies to express trusts in Pennsylvania?

A

The Uniform Trust Act, which provides rules pertaining to trusts, trustees, and beneficiaries.

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4
Q

What UTA rules cannot be contracted out of?

A
  1. Trust creation requirements;
  2. trustee’s duties of good faith and loyalty to the beneficiaries, including the duty to keep the beneficiaries informed and act in accordance with the terms and purposes of the trust;
  3. requirements that the trust purpose be lawful, in keeping with public policy, and capable of achievement;
  4. court’s power to modify or terminate a trust;
  5. effect of spendthrift provisions; and
  6. rights of third parties engaging in transactions with the trustee.
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5
Q

What are the elements of a valid private express trust?

A
  1. Intent
  2. Trust property
  3. Valid trust purpose
  4. Ascertainable beneficiaries
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6
Q

What will create a presumption of intent to create a trust?

A

“In trust” or “trustee”

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7
Q

When must the intent be manifested?

A

Either prior to or simultaneously with the transfer of property. If transfer doesn’t occur immediately, then the intent should be manifested anew at the time of transfer.

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8
Q

Can you make an oral trust?

A

No, the settlor’s intent must be manifested in writing, although there is no requirement that the settlor communicate his intent to the beneficiaries.

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9
Q

What if there is ambiguous languageas to intent?

A

A determination must be made regarding whether a bifurcated transfer was intended and, if so, whether theintent was more than a mere hope or wish.

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10
Q

What if you use precatory language as to the disposition of property?

A

It will not create a trust in Pennsylvania. The words will either be construed as mandatory or as meaningless.

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11
Q

What property may be incldued in a trust?

A

Property that was owned by the settlor at the time the trust was created and was at that time transferred to the trust or to the trustee.

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12
Q

Will fractional property interests suffice?

A

Yes. Anything except for a mere expectancy. (Future earnings under an existing agreement are good though.)

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13
Q

What distinguishes a trust from a debt?

A

A trust requires identifiable trust property–it involves the duty of one party to deal with specific property for another.

A debt involves the obligation of one party to another.

N.B.: If a recipient of funds can use them and co-mingle them as he pleases, then the obligation to pay the funds to another is a debt, not a trust.

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14
Q

What requirements are there for trust property?

A
  1. Segregated
  2. Identifiable
  3. Described with reasonable certainty
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15
Q

What constitutes a valid trust purpose?

A

Any purpose, as long as it isn’t illegal or contrary to public policy.

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16
Q

Are trusts severable?

A

Yes. If a term is violative of public policy, any alternative terms provided by the settlor will be honored. If none, then the term will be stricken, but the trust will still be valid (unless removing that term proves fatal).

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17
Q

What does the “ascertainable beneficiary” requirement entail?

A

That the beneficiary be ascertainable (like, identifiable by name) so that the equitable interest can be transfered automatically by operation of law.

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18
Q

What are the three exceptions to ascertainable beneficiary requirement?

A
  1. Unborn children
  2. Class gifts
    1. Will be upheld if the class is reasonably definite, even when the trustee may select the beneficiaries from among the members of a class.
  3. Charitable trusts
    1. Only private trusts need to have ascertainable beneficiaries.
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19
Q

How can you create a trust?

A
  1. Inter vivos
  2. Testamentary
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20
Q

When do inter vivos trusts become possessory?

A

At the death of the settlor.

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21
Q

When does the trustee take legal title of the property?

A

For real property: upon the delivery of a deed or other document of title, PROVIDED THAT the trust is in a writing that satisfies the SOF.

For personal property: upon delivery of the personal property.

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22
Q

What if the Statute of Frauds is not satisfied?

A

Then a constructive trust is created and the purported trustee must distribute the real property to the intended beneficiaries outright, rather than in a trust.

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23
Q

What if the terms of a written trust instrument are ambiguous?

A

Parol evidence is admissible to prove intent. Otherwise, it is not admissible.

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24
Q

What is a Totten trust?

A

It’s a fake trust. A designation given to a bank account in a depositor’s name as “trustee” for a named beneficiary. Depositor has control and depositor’s creditors can get at it.

Will automatically terminate if the beneficiary predeceases the depositor.

Can be revoked by any act manifesting the depositor’s intent to revoke, including by will. (This distinguishes it from a joint bank account, which passes to the co-tenant at death.)

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25
Q

What is a testamentary trust?

A

A trust whose terms are contained in a will or document incorporated by a will.

26
Q

Must testamentary trusts comply with the Statute of Wills?

A

Yes, though if it does not, it could be a constructive or resulting trust, still.

27
Q

What if you get divorced and die?

A

Then an interest created by the terms of a testamentary trust in favor of the divorced spouse will be ineffective, UNLESS it was clearly intended to survive the divorce.

An interest created by a revocable trust and not revoked during the testator’s lifetime, though, may still be enforced.

28
Q

What is a constructive or “secret” trust?

A

A trust that looks like a testamentary gift but is created in reliance on the named beneficiary’s promise to hold and administer the property for another.

29
Q

How will a constructive or “secret” trust be proven?

A

By clear and convincing evidence, including extrinsic evidence, to prove the promise. When the promise was made is immaterial.

30
Q

What is a resulting or “semi-secret” trust?

A

A gift that is directed in a will to be held in trust, but the testator fails to name a beneficiary.

31
Q

How can a semi-secret or resulting trust be proven?

A

It can’t be. The gift will fail as a violation of the Statute of Wills and a resulting trust will be imposed on the property to be held in trust for the testator’s heirs.

32
Q

What is the modern trend (under the Third Restatement) as far as secret and semi-secret trusts go?

A

To impose a constructive trust in favor of the intended beneficiaries (if known).

33
Q

What is a pour-over trust?

A

A provision in a will that directs the distribution of property to a trust upon the happening of an event, so that the property passes according to the terms of the trust without the necessity of the will reciting the entire trust.

34
Q

When will a pour-over trust be valid?

A

When it is identified in the will and sufficiently described in writing.

35
Q

Can a pour-over trust be revoked?

A

Yes. If both the will and the trust are revoked, then the pour-over trust is revoked too. If only the trust is revoked, then the pour-over provision fails.

Unsure if there’s a practical difference here.

36
Q

What will be considered a charitable trust?

A

A trust that has a stated charitable purpose and exists for the benefit of the community at large OR for a large class of persons.

They’re usually construed quite liberally.

37
Q

Who has standing to challenge a charitable trust?

A
  1. The settlor
  2. A qualified beneficiary
  3. The state attorney general
38
Q

If a trust fails as a charitable trust, could it still be a private express trust?

A

Yep!

39
Q

What is a charitable purpose?

A
  1. The relief of poverty;
  2. the advancement of education or religion;
  3. the promotion of good health
  4. government or municipal purposes
  5. other purposes benefiting the community at large or a particular segment of the community
40
Q

How will a court decide if a beneficiary is charitable?

A

By inquiring into the predominant purpose of the organization and the determination of whether the organization is aimed at making a profit.

Political party is not charitable, though a political movement may be.

41
Q

Can a charitable trust require matching funds?

A

Yes.

42
Q

What if a trust has both charitable and non-charitable purposes?

A

Then the rulse applying to charitable trusts won’t apply, unless two separate and distinct trust shares are capable of being administered.

This will only be found when there is an indication of how much of the corpus is to be applied to charitable purposes and its duration.

43
Q

What are benevolent trusts?

A

A trust identified by the settlor as merely “benevolent.” These will not be deemed a charitable trust UNLESS the acts called for in the trust fall under the acceptable charitable purposes.

Mostly now though nobody distinguishes these from charitable trusts.

44
Q

Do we like or not like charitable trusts?

A

We like them. Try to find a way to make a trust charitable.

45
Q

Who can be a beneficiary of a charitable trust?

A

It must be the community at large, or a class comprising unidentifiable members.

A very small class could still qualify though. The settlor could also grant the trustee discretion to choose beneficiaries form a large class.

46
Q

Does the Rule Against Perpetuities apply to charitable trusts?

A

Nope.

47
Q

What is the Cy Pres doctrine?

A

This allows a court to modify a charitable trust to seek an alternative charitable purpose if the original purpose becomes illegal, impracticable, or impossible to perform.

STEPS

  1. Determine the settlor’s primary purpose
  2. Select a new purpose “as near as possible” to that one.
48
Q

Will the Cy Pres doctrine apply if the settlor would not have wished an alternative charitable purpose to be selected?

A

No. It’ll be subject to a resulting trust for the benefit of the settlor’s estate.

49
Q

What if no charitable beneficiaries are named in the trust instrument?

A

Then the court will pick one or more.

50
Q

What is an honorary trust?

A

One that is not created for charitable purposes and that does not have private beneficiaries.

Examples: Trusts for the care of animals or cemetery lots.

Trustee is “on her honor” to administer the trust, and failing to do so will permit an individual named in the trust beneficiary (or appointed by the court) to enforce the trust.

51
Q

What is a remedial trust?

A

Trusts created by operation of law as equitable remedies. Not subject to the trust creation requiements!

52
Q

What is the duty of a trustee to a remedial trust?

A

Solely to convey the trust property to the beneficiary.

53
Q

When will the court create a resulting trust?

A

When the trust fails in some way or when there is an incomplete disposition of trust property. The resulting trust will require the holder of the property to return it to the settlor or the settlor’s estate.

54
Q

What is the point of a resulting trust?

A

To avoid unjust enrichment and to achieve the settlor’s likely intent in attempting to create the trust.

55
Q

When might unjust enrichment exist so as to warrant the creation of a resulting trust?

A
  1. When a party other than the holder of trust property supplied the consideration (unless there is a close familial relationship between the two)
  2. When the trust was established for some unlawful purpose, such as to avoid creditors or taxes.
56
Q

What is a constructive trust?

A

Trusts created to prevent unjust enrichment in instances of:

  • fraud
  • duress
  • undue influence
  • breach of contractual or fiduciary duty
  • detrimental reliance by a third party on a false written representation by the settlor

Or also homicide.

57
Q

Will a constructive trust be imposed upon the violation of an oral agreement?

A

No, even if the agreement was relied upon UNLESS the violation constituted fraud, was commited by a fiduciary, or concerned the contents of the promisor’s will.

58
Q

What if there was wrongful conduct but the property has already been sold or disposed of?

A

Then the beneficiary of the trust may pursue the sale proceeds or other property received. (Tracing doctrine)

Constructive trust can be imposed against either the seller or the buyer.

59
Q

Who will be prevented from seeking a constructive trust?

A

Somebody with unclean hands.

60
Q

What is a gift-over clause?

A

A provision providing for a disposition of the trust property in the event the trust purpose fails. Usually honored before imposing an equitable remedy.