Failing Trusts Flashcards
What is a disclaimer?
When a beneficiary does not wish to enforce their rights under the trust.
when can a beneficiary disclaim their trust interest?
Within a reasonable time after learning about the trust (typically up to 9 months), absent some act of expressed or implied acceptance
what happens when a beneficiary disclaims her trust interest?
upon disclaimer, any interest that otherwise would pass to that person under the trust, passes as though the disclaiming party predeceased the life tenant.
Most states: disclaimer not effective unless in writing and filed within 9 months of the decedent’s death
when will a trust fail?
where a remainder interest is conditioned on a beneficiary’s surviving the settlor and the beneficiary does not meet that condition
what happens when a trust fails?
Resulting trust - when a portion of the trust fails for lack of beneficiary, a resulting trust in favor of the settlor’s successor in interest is presumed.
Resulting Trusts
- Purchase Money resulting trusts - person taking title did not supply consideration; sole duty is to convey title to one furnishing consideration
- no resulting trust presumption if parties closely related - failure of express trust - resulting trust arises with settlor as beneficiary
- excess corpus - if trust property remains after purpose fulfilled, resulting trust for settlor arises
Constructive Trusts
Equitable remedy to prevent unjust enrichment
Applies in cases of:
- theft of conversion
- fraud, duress, undue influence, mistake, or interference with contract relations.
- breach of fiduciary duty (e.g., attorney-client, director-corporation, trustee-beneficiary)
- breach of fraudulent promise, promise by one in confidential relationship, promise concerning will or inheritance, promise to forgo foreclosure bid)
Anti-Lapse Statutes
Nearly all states have anti-lapse statutes that operate to save a gift to a predeceasing beneficiary if the beneficiary was in a specified degree of relationship to the testator and left surviving issue. Typically, these statutes only apply to TESTAMENTARY GIFTS. Generally, they do not apply to trusts.
The UPC and some states have opted to apply the anti-lapse statutes to future interests created in trusts, however. In these states, if a gift is made in trust to a class described as “children,” the property to which a deceased beneficiary would have been entitled if he had survived will pass to his surviving issue by representation.
RAP
- Under the common law RAP, a gift must vest or fail within 21 years after a life in being.
- Under the modified “wait and see” approach to the rule, the validity of events is judged by actual events as they happen.
- Under the rule of convenience, when a will makes a class gift but postpones the time for possession and enjoyment of the gift, the class closes at the time fixed for distribution.