Express Private Trusts Flashcards
Settlor’s intent has 3 facets:
- Transferor must have intended a trust
- The settlor must have the capacity to formulate the requisite trust intent
- The intent to create a trust must be a present intent
Requirements for creation of an express trust:
- A Settlor with capacity to convey,
- A present intent to create a trust,
- A competent Trustee with fiduciary duties,
- A definite beneficiary,
- The same person is not the sole trustee and sole beneficiary,
- Present disposition in trust of specific property then owned by the settlor, and
- Valid trust purpose.
Capacity of Settlor
Capacity to create a revocable or testamentary trust is the same as for a valid will.
To create an irrevocable trust, the settlor must have legal power to convey the trust property.
Beneficiaries
A private express trust must generally have at least one definite beneficiary presently ascertainable or ascertainable within the applicable Rule Against Perpetuities. § 736.0402(1)(c), (2)
§ 736.0402(e) provides, however, that a “power of a trustee to select a beneficiary from an indefinite class is valid”
Ascertainable beneficiary can have a:
Present or future interest (e.g. class gift)
With vested or contingent interests
As long as it complies with RAP
How must a settler’s intent be manifested?
Intent may be manifested by written or spoken words or by the conduct of the settlor, unless the Statute of Wills or Statute of Frauds applies.
An oral trust of personal property is valid in almost all jurisdictions.
Communication of intent to the benes is not necessary; delivery of the deed to the trustee is sufficient.
Trust without a Trustee
Once established, a trust will not fail because the trustee dies, refuses to accept 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 for lack of delivery.
Acceptance of trusteeship
A person accepts a trusteeship by:
- Substantially complying with the acceptance terms in the trust instrument, or
- Accepting delivery of trust property, exercising powers or performing duties as trustee, or indicating acceptance.
However, the person designated as trustee may still act to preserve the trust property without accepting the trusteeship, provided he sends notice of rejection to a qualified bene. If the trusteeship is not accepted within a reasonable time, it is presumed to be rejected.
Qualifications of trustee
Anyone who has capacity to acquire and hold property for his own benefit and has capacity to administer the trust may be a trustee.
Minors and insane persons can hold property, but cannot administer.
How can a Trustee be removed?
A court can remove a trustee on its own motion or upon request by the settlor, a bene, or a co-trustee.
Grounds to remove trustee:
- A serious breach of trust,
- Lack of cooperation among co-trustees,
- unfitness, unwillingness, or persistent failure to administer, or
- A substantial change in circumstances.
The basic factor considered is whether continuation in office would be detrimental to the trust.
Disclaimer or resignation by trustee
Before acceptance, a trustee can disclaim or refuse appointment for any reason. However, a trustee cannot accept a trust in part and disclaim it in part.
Relation back of acceptance
A testamentary trust is treated as in existence as of the settlor’s death, and the trustee’s acceptance “relates back” to that date. It is thus possible for a trustee, by accepting, to become liable (in his fiduciary capacity) on tort claims arising prior to the time he accepted.
Resignation
Once an appointment has been accepted, the trustee can resign by either:
- Giving 30 days’ notice to the qualified benes, settlor (if living), and co-trustees; or
- Obtaining court approval.
Qualified bene
A living bene who on the date his qualification is determined, is:
- A current bene, or
- A first-line remainderman.
