Express Private Trusts

Question 1

What are the elements of an express trust?

Answer 1

Express trusts are governed by the Uniform Trust Code (UTC). They require five elements:
1. a settlor with capacity to convey;
2. A present intent to create a trust relationship;
3. A competent trustee with duties;
4. A definite beneficiary; and
5. The same person is not the sole trustee and the sole beneficiary.
Additionally, there must be a present disposition in trust of specific property then owned by the settlor, and the trust must have a valid trust purpose. However, Consideration is not required.

Question 2

What is required for a settlor to have capacity?

Answer 2

The capacity required to create a revocable or testamentary trust is the same as required to make a will.
The settlor’s lack of legal capacity to convey prevents a trust from arising, and undue influence, fraud, or duress renders the trust unenforceable.

Question 3

What is the capacity required to create an irrevocable trust?

Answer 3

Settlor must have legal power to convey the trust property.

Question 4

Does an oral trust to convey personal property violate the statute of frauds?

Answer 4

No. An oral trust of personal property is valid.

Question 5

When does the trust have to take effect?

Answer 5

The settlor must intend to have the trust take effect immediately. Not at some future time.

Question 6

What is a precatory expression and can it form a trust?

Answer 6

Precatory language is an expression of a hope, wish, or mere suggestion that the property be used in a certain way. The usual inference is that precatory expressions do not create a trust.

Question 7

How can a precatory expression’s inference that it does not create a trust be overcome?

Answer 7

1. Definite and precise directions;
2. Directions addressed to a fiduciary;
3. A resulting “unnatural deposition” of property (e.g. a close relative will take nothing) if no trust is imposed; or
4. Extrinsic evidence showing that the settlor previously supported the intended beneficiary.

Question 8

Once a trust is established, will it fail because a trustee dies or refuses to accept the appointment?

Answer 8

Once established, a trust will not fail because the trustee dies, refuses to accept the appointment or resigns. The court will appoint a successor trustee unless it is clear that the settlor intended the trust to continue only so long as a particular trustee served. The absence of a trustee may cause an attempted inter vivos trust to fail.

Question 9

How does a person accept a trusteeship?

Answer 9

By:

1. Substantially complying with the acceptance terms in the trust instrument; or
2. Accepting delivery of trust property, exercising powers or performing duties as trustee, or indicating acceptance.

Question 10

What does it mean that that trustee must have duties?

Answer 10

The settlor must intend to impose enforceable duties on the trustee. If duties are not spelled out in the trust instrument, the court will usually imply duties if there is an intention to create a trust, a res, and an identified beneficiary.

Question 11

Is a trustee entitled to compensation?

Answer 11

Yes. They are entitled to reasonable compensation or to compensation specified in the trust instrument. A trustee is entitled to reimbursement for expenses incurred in the trust’s administration and any other expenses that resulted ina benefit to the trust.

Question 12

What are the grounds for removing a trustee?

Answer 12

A court can remove a trustee on its own motion or upon request by the settlor, a benefiicary, or a co-trustee. Grounds for removal include:

1. A serious breach of trust;
2. Lack of cooperation among co-trustees;
3. Unfitness, unwillingness, or persistent failure to administer; or
4. A substantial change in circumstances.

Question 13

Who is a qualified beneficiary?

Answer 13

A beneficiary who, on the date the beneficiary’s qualification is determined, is:

1. A current beneficiary;
2. or a first-line remainderman.

Question 14

Are unascertained beneficiaries sufficient to establish a private trust? 
What about class gifts?

Answer 14

Yes, beneficiaries may be definite even though not yet ascertained. However, they must be ascertainable by the time their interests come to enjoyment. 
At common law, a class gift must be reasonably definite. However, under the UTC, a settlor may empower the trustee to select the beneficiaries from an indefinite class.

Question 15

What are the trust purposes that will negate a trust?

Answer 15

1. Illegal;
2. Contrary to public policy;
3. Impossible to achieve; or
4. Intended to defraud the settlors creditors or based on illegal consideration.

Question 16

When will a trust violate public policy?

Answer 16

Public policy is violated if the purpose of a trust is to: induce others to engage in criminal or tortious acts; encourage immortality, or induce a person to neglect parental, familial, or civil duties. If a condition attached to an interest is against public policy:

1. The settlor’s alternative desire controls, if expressed;
2. If the illegal condition is a condition subsequent, the condition is invalidated by the trust is valid;
3. If the illegal condition is a condition precedent, the preferred view is to hold the interest valid unless there is evidence that the settlor’s wish would be to void the beneficiary’s interest altogether if the condition is unenforceable.

Question 17

What are the elements of a valid private trust?

Answer 17

1. Settlor with capacity;
2. Present intent to create a trust;
3. Trustee;
4. Definite beneficiary;
5. Trust property;
6. Valid trust purpose.

Question 18

What is required to create an inter vivos trust?

Answer 18

1. Present declaration or Transfer of Trust - person either declares themselves a trustee for another or transfers the property to another. Must be manifested by conduct or words.
2. Statute of Frauds - Personal property does not require a writing but must be able to be proved by clear and convincing evidence. However, land trusts require fulfilling SofF.
3. Parol Evidence Rule - Most states allow extrinsic evidence where there is an ambiguity.

Question 19

What are the formalities required for a testamentary trust?

Answer 19

Trust intent and the essential terms of the trust (i.e. trust res, beneficiaries, and trust purpose) must be ascertained from the will itself, from a writing incorporated by the reference into the will, or from the exercise of a power of appointment created by the will.

Question 20

What is a secret trust?

Answer 20

The constructive trust is imposed.
Where a will makes a gift that is absolute on its face, but was in fact made in reliance on the beneficiary’s promise to hold the property in trust for another, the intended trust beneficiary may present extrinsic evidence of the promise by clear and convincing evidence.

Question 21

What is a semi-secret trust?

Answer 21

Resulting trust is implied.
In a semi-secret trust, the will makes a gift in trust but fails to name the beneficiary. The gift fails, and the named trustee holds the property on a resulting trust for the testator’s heirs.