Express Private Trusts Flashcards
Express Trust
Fiduciary relationship with respect to property whereby the trustee holds legal TITLE for the benefit of the beneficiary
Res
Property of a express trust. Must be a PRESENTLY EXISTING interest in property that can be transferred.
No res, no trust
Ex: fee simple, future interest to profits from an existing K, life insurance policy, bonds, stocks
Settlor
Creator of the trust. Must have intent to create a trust
Illusory Interests
cannot be the res of a trust.
Ex: future profits to a business; debt that settlor owes beneficiary (liability, not property); mere expectancy in property
Beneficiary
necessary to a valid trust, except charitable and honorary trusts
Notice to a beneficiary is not required, but lack of notice may indicate that no trust was intended. Acceptance is required, but can take place after the trust is created (can be express or implied and is usually presumed)
Who can be a beneficiary?
ANY ASCERTAINABLE PERSON or group of people can be the beneficiary of a private express trust
Corporations can be beneficiary
Unincorporated associations: common law could not be, modern law can be
Class Gift
Valid beneficiaries
NOTE: lookout for classes that are too big, e.g. all of California. Even if ascertainable, can’t be administered
RAP
Look out for RAP problems
Trustee
Trust must have a trustee, but the court will not allow the trust to fail SOLELY because there is no trustee or a trustee refuses to serve
Court will appoint a trustee if necessary (e.g. trustee dies), unless if it is clear that the settlor intended the trust to continue only until a particular trustee served
Anyone with capacity to administer the trust may be a trustee
Removal of Trustee
(1) serious breach of trust; (2) old age; (3) drunkenness; (4) conflict of interest, etc.
Basic factor is whether continuation in office would be DETRIMENTAL to the trust
Absent grounds, beneficiaries MAY NOT remove trustee UNLESS the power is specifically granted to them by the trust instrument
Disclaimer or Resignation by Trustee
Before acceptance, trustee can disclaim or refuse appointment for any reason, but can’t accept in part and disclaim in part
Trust Intent
There must be PRESENT manifestation of trust intent by the settlor. Can’t manifest an intent for a trust to arise in the future
Generally need mandatory words (definite and precise directions or directions addressed to a fiduciary)
Precatory Expressions
Def: Settlor’s express of hope, wish, or mere suggestions that the property be used in a certain way
INSUFFICIENT to create a trust on its own, but parol evidence may make precatory expressions sufficient
If parol evidence insufficient, transferee gets property in fee simple
Creating an Express Trust
Can be done by inter vivos transfer, inter vivos declaration of trust, or by will (testamentary trust)
Testamentary Trust
When trust created to take effect at a settlor’s death. Essentially part of the will
Trust intent and essential terms of the trust (res, beneficiaries, and purpose) must be ascertained IN THE WILL ITSELF or from a writing INCORPORATED by reference in the will
Ex: Will states “I devise Blackacre to bank to hold in trust for my son for his life”
Transfer in Trust
Third person is the trustee
Real Property: settlor must execute and deliver a deed transferring title to trustee. Must also be in WRITING for SoF
Personal Property: must be delivery to the trustee of the res at the time settlor manifests the intent to create the trust. Can be ACTUAL, SYMBOLIC, or CONSTRUCTIVE delivery.
No delivery, no trust. Promise to deliver in the future is NOT delivery
Declaration in Trust
Settlor herself is the trustee
Real Property: must have a writing satisfying the SoF that indicates that Settlor is the trustee
Personal Property: b/c settlor is trustee, no issue of delivery. Only need present intent (Ex: I declare myself Trustee of this 100K for Abel during his lifetime)
Valid Trust Purpose
To be valid, a trust must be established for a legal purpose, but can be any legal purpose
Illegal purpose at creation
Can be illegal purpose or something that violates public policy (encouraging divorce)
Look for illegal conditions precedent.
Court will excise illicit condition and allow beneficiary to take free of the condition. If not possible to excise the illicit condition, then court has two options:
(1) Invalidate the trust completely (settlor remains owner of property), or (2) allow the trustee to keep the property for himself (punish settlor who does not have clean hands)
Illegality after creation
When a trust becomes illegal after creation but is valid at the time it is made
Creates a RESULTING TRUST in favor of settlor if alive, or estate if dead
Trustee Acceptance
Acceptance is presumed
Once accepted, can no longer disclaim–can only resign
