Final Days Flashcards
I. FORMAL REQUIREMENTS OF A TRUST
TRUST-trustee holds legal title to trust assets for the benefit of the beneficiaries. Trustee has all of the burdens of ownership (duty to manage, invest, insure, safeguard, etc.); beneficiaries have equitable title and all of the benefits of ownership.
- To have a valid trust, SETTLOR (grantor) . . . DELIVERS . . . title to TRUST PROPERTY . . . to a TRUSTEE . . . for the benefit of BENEFICIARIES with INTENT TO CREATE A TRUST. Trust must be for a LAWFUL PURPOSE. [Feb. 1998:] As with gifts, NO CONSIDERATION is required
A. SETTLOR must have legal capacity.
B. DELIVERY requirement does not apply to a self-declaration of trust or testamentary trust
C. TRUST PROPERTY: [July 1993] To have a trust, legal title to a specific interest in property must be conveyed to the trustee.
D. TRUSTEE: Must have legal capacity to deal with the property-An individual named as trustee must post a fiduciary surety bond unless the settlor waived the requirement of a bond. However [July 1993], a corporate trustee (bank or trust company) does not have to give bond. A trustee is entitled to reasonable compensation for serving as trustee
- *no trust ever fails for lack of a trustee.
- *No one can be compelled to accept fiduciary responsibilities and duties
E. BENEFICIARIES: A noncharitable trust must have definite and ascertainable bene-ficiaries, and their interests must vest, if at all, no later than lives in being plus 21 years.
F. INTENT TO CREATE A TRUST: IS THE LANGUAGE PRECATORY (a non-binding suggestion), or does it impose an ENFORCEABLE OBLIGATION
G. LAWFUL PURPOSE
REVOCABLE TRUSTS
- all inter vivos trusts are revocable and amendable by the settlor unless expressly made irrevocable and unamendable. (but if incap, can’t be revoked by guardian, only court upon finding in Ward’s best interest)
- Valid trust even though settlor retains income, power to revoke, power to control trustee, and
even though trust disposes of property at settlor’s death, as long as trust named remainderman - Unfunded revocable life insurance trust was valid and could receive pourover gift from will
Guardian cannot revoke revocable trust established before incapacity; only court can revoke the trust
III. CHARITABLE TRUSTS; HONORARY TRUSTS’
and Constructive Trusts
DISTINCTIVE RULES APPLY TO CHARITABLE TRUSTS #1. [July 1995] Not subject to the Rule against Perpetuities; may be perpetual. Example: "to pay the income to the American Red Cross forever." #2. Must be a charitable purpose. Must confer a substantial amount of social benefit: religion, education, relief of poverty, medical research. [July 1991, Feb. 1994: Bequest "to be used for charitable purposes" created valid charitable trust although no specific beneficiary named.] [July 1998: “to support the performing arts” a valid charitable purpose.] #3. Must be in favor of a reasonably large segment of public at large, and cannot benefit identifiable individuals. (A trust for "my poor relatives" is not a charitable trust.) #4. When specific charitable purpose can no longer be accomplished, may be reformed in judicial proceedings under the doctrine of cy pres. (Old French for "as near as possible.") [Feb. 1984: diverting funds to another charitable activity can't be done by trustee acting on his own; must be judicial proceeding.]
Constructive trust:
A constructive trust is not a trust. It is an equitable remedy whose object is to disgorge unjust enrichment. [July 2004] Benefit of constructive trust: Enables injured party to recover the very property in dispute; doesn’t have to settle for judgment for money damages.
Two elements: (1) wrongful conduct; (2) unjust enrichment
CREDITORS’ RIGHTS AND SPENDTHRIFT TRUSTS
Spendthrift clauses are given full effect in Texas. Purpose of spendthrift clause: Protects a trust beneficiary’s interest from creditors by prohibiting voluntary assignment [Feb. 2001] or involuntary transfer of the beneficiary’s interest
Exceptions: #1. Contracts for necessaries #2. Child support obligations [July 2008] #3. Any interest retained by the Settlor #3A. Revocable trust [July 2008] #4. Federal tax liens [July 2008] #5 Fraudulent transfer: transfer made with intent to defeat, delay, or defraud creditors.
Once the income is distributed, it is no longer subject to the trust or its spendthrift clause.
SELF-DEALING
Impermissible self-dealing where:
[1] Trustee borrows trust funds
Trustee buys trust asset
[2] Loan or sale to relative
Sale to corporation of which trustee was an officer; sale to business associate
[3] Trust property used as collateral for personal loan
Trust funds used to buy stock of company of which trustee was an executive
But since stock had increased in value, no damage to trust
[4] Trustee takes commission for selling asset, or bonus for investing in start-up company
[5] Settlor can waive self-dealing rules with respect to either corporate or individual trustee
[6] Trustee can loan funds to beneficiary subject to prudence test
But loan must be at reasonable interest, secured, and with a repayment schedule
Exculpatory clause, by itself, did not authorize self-dealing by trustee
OTHER TRUST ADMINISTRATION ISSUES
[1] Texas Trust Code governs trust administration (absent contrary provision)
[2] Trustee has power to: grant lease extending beyond term of trust; sell property on unsecured note
Broad latitude is given to trustee’s decisions; beneficiary’s belief that sale of property is unwise or
investment strategy is questionable is no basis for action against trustee
Failure to appraise closely held stock before selling it may have been breach of trust; not prudent
[3] Trustee has duty to insure trust assets if prudent person would insure them
[4] Accountings must be given at 12-month intervals, but only if beneficiary makes written demand
[5] Trustee cannot make distribution not authorized by trust instrument
Facility of payment clause: trustee can distribute on behalf of incapacitated beneficiary by informally
paying bills, mortgage on behalf of beneficiary
MODIFICATION AND TERMINATION OF TRUSTS [8]
- Trust can be modified if, due to circumstances not known to or anticipated by settlor, compliance
with terms would defeat or impair trust purposes - Trustee or beneficiary can petition for early termination, but Trust Code doesn’t give settlor such
authority - Settlor (or settlor’s guardian) could not terminate irrevocable trust… because he disapproved of beneficiary’s lifestyle
because settlor had become impoverished - Trust can be terminated early if trust purposes have been fulfilled or become illegal or impossible
Trust to terminate when B reaches 35 couldn’t be terminated; reaching 35 was trust purpose - Early termination of trust requires judicial action; cannot be terminated early by agreement of parties
On termination, trustee can continue to exercise trust powers necessary to wind up trust affairs and
trust estate to beneficiaries
MODIFICATION AND TERMINATION OF TRUSTS [8]
- Trust can be modified if, due to circumstances not known to or anticipated by settlor, compliance
with terms would defeat or impair trust purposes - Trustee or beneficiary can petition for early termination, but Trust Code doesn’t give settlor such
authority - Settlor (or settlor’s guardian) could not terminate irrevocable trust… because he disapproved of beneficiary’s lifestyle
because settlor had become impoverished - Trust can be terminated early if trust purposes have been fulfilled or become illegal or impossible
Trust to terminate when B reaches 35 couldn’t be terminated; reaching 35 was trust purpose - Early termination of trust requires judicial action; cannot be terminated early by agreement of parties
On termination, trustee can continue to exercise trust powers necessary to wind up trust affairs and
trust estate to beneficiaries
DPTA- What it is and who can sue
- DPTA is liberally construed to protect consumers and generally may not be waived
- Waiver is void unless in writing signerd consumer is not in disperate bargaining position and represented by attorney
- PROPER PARTY PLAINTIFF–CONSUMER
an entity that seeks (purchase or good faith attempt to purchase) or acquires (purchaser or intended beneficiary) by purchase or lease (can’t be free but you don’t have to be the one who bought them) any good (Goods includes RE and excludes mooney and inteagibles) or services (Service includes insurance and excludes a PURE loan)
Exemptions-
A. biz consumer are protected by DPTA unless they have assets of $25M+
“A DEFENDANT HAS THE BURDEN TO PROVE THE BUSINESS CONSUMER EXCEPTION AS AN AFFIRMATIVE DEFENSE.”
B. Professional Services- the essence of which is the providing of advice, judgment, opinion, or similar professional skill.”
Unless
1. an express misrepresentation of a material fact that cannot be characterized as advice, judgment, or opinion;
2. a failure to disclose information in violation of Section 17.46(b)(24);
3. an unconscionable action or course of action that cannot be characterized as advice, judgment,
or opinion; or
4. breach of an express warranty that cannot be characterized as advice, judgment, or opinion.”
C. Large Transactions
>$100K Exempt if written signed contract and consumer is represented by attorney and does not relate to a residence
> $500K- No need for written contract or attorney- not a residence
Who may be sued, claims, and remedies
Who may be sued:
Who can be sued- all immediate parties (part of transaction) and no privity req. but transaction must form basis of complaint
IF REMOTE PARTY DISCUSS “IN CONNECTION WITH”
“In connection with” Rule: Conduct must be in connection w/ consumer transaction and the key is- did the misrep of the remote party reach the consumer
Four Claims:
(1) The use or employment by any person of a false, misleading, or deceptive act or practice that is: within the laundry list (Req. reliance but does not require privity, knowledge, or intent)
- Major ones- misrep, failure to disclose(knew info, did not disclose, intent to induce, terms would have been different if disclosed),
(2) breach of an express or implied warranty;
(3) any unconscionable action or course of action by any person (unconscionability (grossly unfair taking advantage)
(4) the use or employment by any person of an act or practice in violation of Chapter 541,
Insurance Code
Settlement offers: limits a consumer’s recovery of damages if the court finds that the Defendant’s settlement offer is the same, substantially the same as, or more than
Remedies:
A producing cause is a substantial factor which brings about the injury and without which the injury would not have occurred
-You may negate producing cause with a contract that says as is, no reliance
Damages in General:
Economic damages
Mental Anguish Damages:
Legal prerequisite: conduct of the defendant was committed knowingly (knew or should’ve known)
Mental Anguish-Standard of Proof: substantial disruption or high degree of mental pain and distress
If consumer prevails, jury may award “economic damages.”
If jury finds defendant acted “knowingly,” jury may also award additional damages, up to twice the economic damages [up to a total of three times economic damages], and may also award damages for “mental anguish.”
If jury finds defendant acted “intentionally,” jury may also award economic damages, damages for mental anguish and additional damages up to twice the amount of economic damages and damages for mental anguish [up to a total of three times economic and mental anguish damages].
ADD: “IN AN APPROPRIATE CASE THE
CONSUMER MAY ALSO RECOVER EQUITABLE AND INJUNCTIVE RELIEF.”
State Debt Collection
agreggious wrongful debt collection is a tort with all tort damages
Consumer is defined as “an individual who has a consumer debt.”
Debt Collectors—Prohibited Conduct
1. List is Exclusive and includes
Threats or Coercion, Harassment and Abuse, Unfair or Unconscionable Conduct, Fraudulent, Deceptive, or Misleading Representations
- Enforcement
Civil Remedies
a. A person may sue for:
(i) injunctive relief to prevent or restrain a violation of the TDCA; or
(ii) actual damages
b. Attorneys’ Fees- A person who successfully maintains an action is entitled to attorneys’ fees
If the court finds that the action was brought in bad faith or for purposes of harassment, the court shall award the defendant attorneys’ fees
c. Minimum Recovery- not less than $100
Tie-in statutes and INSURANCE
If you have a tie-in statute you have three seperate claims: pure other law claim, pure DTPA claim, and the tie-in claim (highest damages)
Misrepresentation and Discrimination Chapter 541
- Protects against unfair and deceptive acts in the biz of insurance (a DPTA for insurance)
- applies to any person not just consumer and grants actual damages
- also protects insurance companies against anticompetitive practices
- Unfair settlement practices- failing to attempt in good faith to effectuate a prompt, fair, equitable once liability is reasonable clear
- misrep of the terms or existence of the policy
Gives rise to 4 claims- DPTA claim (if consumer), and Chapter 541 claim under DPTA (if consumer), then insurance claim suit under 541 for both the laundry list and deceptive trade practices.
Remedies-
- Actual Damages
- Additional Damages- knowingly not more than three times the amount of actual damages
- Plaintiff’s Attorneys’ Fees- plaintiff who prevails is entitled to recover attorneys’ fees in an amount that is “reasonable and necessary.”
- Defendants’ Attorneys’ Fees- was “groundless and brought in bad faith or brought for the purpose of harassment,”
PROMPT PAYMENT OF CLAIMS [Chapter 542]
- Notice of Claim
An insurer must respond to a claim not later than the 15th day after receipt of notice of a claim or
the 30th business day if the insurer is an eligible surplus lines insurer. - Acceptance or Rejection of Claims 2. in 15 days
- Unable to Accept or Reject- may extend 45 days
- Failure to Accept or Reject- penalty
- Payment of Claims- w/ in 5 days or subject to penalty
- Damages- such insurer
shall be liable to pay the holder of the policy, or the beneficiary making the claim, in addition to the amount of the claim, 18% per annum of the amount of such claim as damages. In addition the insurer shall be liable for reasonable attorneys’ fees
