Express Private Trusts Flashcards
What are the seven elements required for an express trust?
1) a settlor with capacity to convey title to the trustee, or an agent (with power of attorney) who authorizes the creation of a trust on the settlor’s behalf;
2) an intention to create a trust;
3) one or more definite (ascertainable) beneficiaries;
4) a trustee with active duties to perform;
5) the same person is not the sole trustee and the sole beneficiary;
6) a present disposition of identifiable property;
7) the trust must have a lawful purpose;
What is a settlor? What capacity is required?
The person who creates or contributes property to a trust;
The same capacity required to make a will.
Does the use of the words “trustee” and “trust” suffice to conclusively show the existence of a trust.
Are there any magic words necessary to show intent to create a trust?
No.
No. But ambivalent words like “wish;” “hope;” “desire,” etc., generally don’t do the trick.
May an unborn person be a beneficiary of a trust?
Yes, if he will be identifiable at the time his interest comes into enjoyment.
What is a qualified beneficiary?
Someone who, on the relevant date,
1) is currently eligible to receive a distribution from the trust; OR
2) would be eligible to receive a distribution if the trust terminated on that date (i.e. has a vested remainder interest in the trust property)
Once established, will a trust fail because the trustee becomes incapacitated, dies, resigns, or is removed?
No. The court simply appoints a successor trustee.
What are the required qualifications for trustees?
Can a non-resident person be appointed trustee? What about a non-resident bank or trust company?
A trustee must:
1) Be of legal age;
2) Be competent;
3) Have the capacity to enter into contracts.
Yes, provided that she appoint a resident agent for service of process.
No (unless trust is inter-vivos)
How does a person accept a trusteeship?
By (1) substantially complying with the acceptance terms in the trust instrument; or
(2) accepting delivery of trust property, exercising trust powers or performing trust duties, or indicating acceptance
When is an individual required to post a bond?
Only when the court finds that a bond is:
(1) needed to protect the beneficiaries’ interests
(2) required by the terms of the trust;
Unless the trustee is a regulated financial services institution;
How can a trustee resign?
Either by 1) giving 30 days’ notice to the settlor (if living), all co-trustees, and all qualified beneficiaries; OR 2) by obtaining court approval
What are grounds for removal of a trustee?
1) A serious breach of trust;
2) Lack of cooperation among co-trustees;
3) Unfitness, unwillingness; or persistent failure to administer the trust effectively;
4) A substantial change of circumstances
What property can be a trust asset?
Can a debtor hold his own debt in trust? Can a creditor hold another’s debt in trust?
Can the property be an expectancy interest (e.g. an inheritance due from a still-liiving testator?)
Any property that the settlor has the power to convey, provided that it can be adequately described.
No. Yes.
No, but a settlor can create a valid trust that is unfunded during his lifetime to receive a pour-over gift by will.
What happens when property held in tenancy by entirety is transferred to a trust?
Immunity is not lost if:
1) the couple remains married;
2) the property continues to be held in trust;
3) it continues to be their property;
For what purpose can a trust be established?
Any purpose that is not unlawful, contrary to public policy, or impossible to achieve.
A total restraint (but not a partial restraint) on marriage is void as against public policy, and the beneficiary takes the interest free of restriction.
How is an express trust created?
1) By inter vivos or testamentary transfer to a trustee (must be delivered);
2) by self-declaration of trust; OR
3) By exercise of a power of appointment
