Express Private Trusts

Question 1

Express Trust

Answer 1

Fiduciary relationship with respect to property whereby the trustee holds legal TITLE for the benefit of the beneficiary

Question 2

Res

Answer 2

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

Question 3

Settlor

Answer 3

Creator of the trust. Must have intent to create a trust

Question 4

Illusory Interests

Answer 4

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

Question 5

Beneficiary

Answer 5

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)

Question 6

Who can be a beneficiary?

Answer 6

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

Question 7

Class Gift

Answer 7

Valid beneficiaries

NOTE: lookout for classes that are too big, e.g. all of California. Even if ascertainable, can’t be administered

Question 8

RAP

Answer 8

Look out for RAP problems

Question 9

Trustee

Answer 9

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

Question 10

Removal of Trustee

Answer 10

(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

Question 11

Disclaimer or Resignation by Trustee

Answer 11

Before acceptance, trustee can disclaim or refuse appointment for any reason, but can’t accept in part and disclaim in part

Question 12

Trust Intent

Answer 12

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)

Question 13

Precatory Expressions

Answer 13

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

Question 14

Creating an Express Trust

Answer 14

Can be done by inter vivos transfer, inter vivos declaration of trust, or by will (testamentary trust)

Question 15

Testamentary Trust

Answer 15

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”

Question 16

Transfer in Trust

Answer 16

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

Question 17

Declaration in Trust

Answer 17

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)

Question 18

Valid Trust Purpose

Answer 18

To be valid, a trust must be established for a legal purpose, but can be any legal purpose

Question 19

Illegal purpose at creation

Answer 19

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)

Question 20

Illegality after creation

Answer 20

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

Question 21

Trustee Acceptance

Answer 21

Acceptance is presumed

Once accepted, can no longer disclaim–can only resign