Express Private Trusts

Question 1

ELEMENTS: Elements of express private trust

Answer 1

(1) Settlor has capacity to convey, (2) a clear and unequivocal present intent to create a trust relationship, (3) competent trustee with duties, (4) definite beneficiary, and (5) sole trustee cannot be sole beneficiary (b/c otherwise merger occurs and creates a fee simple absolute)

Must also be a present disposition of specific property owned by settlor and trust must have valid trust purpose.

Question 2

ELEMENTS: Present intention to create trust

Answer 2

Can be manifested by words, writing, or conduct (unless SoF applies then writing required).

Must be manifested while settlor ones property.

Delivery of deed creating trust to trustee may manifest intent.

Intent must be to have trust take effect immediately and not in the future. A promise to create a trust in the future may be allowed if settlor manifests intention anew to create the trust. Basically, if settlor promises to create a trust in the future, a trust arises in the future when the assets come into existence and the settlor manifests anew an intention to create the trust. Remanifestation is not required, however, if the promise is supported by valid consideration.

Precatory expressions will not suffice.

Question 3

ELEMENTS: Competent trustee

Answer 3

Acceptance can be by (1) substantially complying with the method of acceptance, or (2) accepting delivery of trust property, exercising powers, or indicating acceptance.

If not accepted within reasonable time, it is presumed rejected.

Absent trustee - refusal to name trustee does not defeat a testamentary trust.

Trustees are entitled to reasonable compensation and for reimbursement of expenses incurred.

Question 4

ELEMENTS: Stated duties for trustee

Answer 4

Settlor must intend to impose enforceable duties on the trustee. If not expressly included, they will be implied.

Question 5

ELEMENTS: Qualifications of trustee

Answer 5

Must have (1) capacity to hold title, and (2) administrative capacity.

Question 6

ELEMENTS: Removal of trustee

Answer 6

Court may remove trustee on its own motion or upon request.

May remove if (1) breach of trust, (2) lack of cooperation among co-trustees, (3) unwillingness, unfitness or persistent failure to administer trust, and (4) substantial change of circumstances so that removal is in the best interest

Question 7

ELEMENTS: Disclaimer or resignation of trustee

Answer 7

Can disclaim but must do it entirely (not in part). If accept, then cannot disclaim and it becomes a matter of resignation.

Successor trustees succeeds to all the rights and powers of original trustee and is subject to their duties.

Question 8

ELEMENTS: Beneficiaries

Answer 8

Must be definite.

A qualified B is one who is either a current B or first-in line remainderman.

Any person who is capable of holding title can be a B. Not unincorporated associations.

Named attorneys are not Bs and have no right to enforce the trust.

Question 9

ELEMENTS: Beneficiaries - Notice & Acceptance

Answer 9

Notice to B is not essential to the validity of the trust. However, a B must accept rights under the trust.

Acceptance may be express or implied. Acceptance is normally presumed

Question 10

ELEMENTS: Beneficiaries - Disclaimer

Answer 10

B can disclaim an interest by filing a written instrument with the trustee. If valid, it is seen as though the B deceased.

Most states require that it be done within 9 months. If not made within time, then it is treated as an assignment.

Disclaimer made by insolvent B can be used to defeat creditors claims.

Question 11

ELEMENTS: Beneficiaries - Anti-Lapse Statutes

Answer 11

These apply mostly to wills and only come into play if a will B within a certain degree of relationship predeceases the testator. Some trusts apply these to trusts.

Question 12

ELEMENTS: Beneficiaries - Divorce

Answer 12

Nearly all states have statutes under which a divorce or annulment revokes testamentary beneficial gifts or fiduciary appointments.

Question 13

ELEMENTS: Beneficiaries - Definiteness

Answer 13

Must be defined.

Unascertained Bs - B’s need not be identified when trust is created but must be susceptible to ID by time interests come to enjoyment.

Unborn Bs can be included.

Class gifts are permitted as long as the class is reasonably definite. UTC allows trustee to select Bs from indefinite class within a reasonable time.

If trust fails because of no definite Bs, a resulting trust in favor of settlor is presumed.

Question 14

ELEMENTS: Trust Property

Answer 14

No res = no trust.

Must be identifiable (no “bulk of my estate” allowed) and segregated.

Property may be of any type. But it cannot be something that has not yet come into legal existence. However, future earning from EXISTING employment contracts is OK.

Under doctrine of potential possession, a person has an interest in thing to be produced if he has means of producing the thing.

Question 15

ELEMENTS: Trust Purpose

Answer 15

Trust cannot be created for a reason that is deemed illegal, contrary to public policy, or impossible to achieve.

Consider rule of perp violations (against public policy).

Question 16

CREATION: Three ways to create

Answer 16

(1) Inter vivos trust (living trust) may be created by declaration of trust by a property owner, stating that he holds property as trustee in trust;
(2) Inter vivos trust may also be created by transfer of property by the settlor during his lifetime
(3) A testamentary trust is created by will

Could also be created by power of appointment.

Question 17

CREATION: Inter vivos trusts (present declaration OR present transfer of trust)

Answer 17

Declaration - trust can be created when one declares himself trustee for another. No delivery is required b/c settlor is trustee.

Transfer - trust is created by transfer of property to another as trustee. Trustee takes legal title.

Generally trust does not have to be in writing or satisfy SoF UNLESS it is for trusts of land.

Question 18

CREATION: testamentary trusts

Answer 18

Trust intent and the essential terms of the trust must be ascertained from one of the following:

(1) terms of will
(2) An existing writing properly incorporated by reference into the will
(3) the exercise of a power of appointment

Question 19

CREATION: testamentary trust (secret and semi-secret trusts)

Answer 19

Secret Trust: the will makes a gift, absolute on its face, to a named B. In reality, the gift was made in reliance upon the B’s promise to hold the gift in trust for another.

• To prevent unjust enrichment of named B (secret trustee), courts allow extrinsic evidence of the agreement.
• If agreement proved with C&CE, constructive trust will be imposed
• SoF or SoW is not a bar

Semi-Secret Trust: Will makes a gift to a person in trust but does not name the beneficiary. This trust is unenforceable because of SoW and the named trustee holds the property on a resulting trust for the testator’s heirs.