FL Trusts Flashcards
Intervivos trust
created by grantor during their lifetime and has effect during ones lifetime
Testamentary trust
created by the grantor’s will and takes effect upon death
Must comply with will formalities (1) signed by settlor and (2) two witnesses signing is presence of settlor and each other
Requirements for creating a trust
- Present intent (no precatory language; delivery of the deed creating the truth is enough)
- Settlor (must be 18+ and have capacity)
- Valid legal purpose
- Trust res (trust property–needs to be funded by money or land)
- Ascertainable beneficiaries
Oral trusts
are allowed so long as the trust isn’t funded by land (then must comply with SOF)
oral trust and terms need to be established by clear and convincing evidence
Class gifts to descendants and other multigenerational classes must be
per stirpes
Effect of subsequent marriage, birth, adoption
Does not revoke a previous revocable trust
If settlor and spouse get divorced
any provision in the trust for the spouse is void (treated as if spouse predeceased)
Anti lapse
ONLY APPLIES TO BLOOD RELATED FAMILY MEMBERS
If a beneficiary dies before the settlor, their surviving descendants get the gift
Charitable trust elements
- no ascertainable beneficiaries
- for an overall public good
- may go on forever (not subject to RAP)
cy pres doctrine
Applies to charitable trusts
1. If a charitable trust fails because the charity no longer exists or trust purpose is impracticable, the court will choose another charity to fulfil the intent of the settlor
2. If funds are leftover, the court will pick a similar charity to give the leftover funds to, to fulfill the settlor’s intent
Equitable Trusts: what are they? what are the types?
Trusts created by the court
1. Constructive Trust: court will impose a trust to prevent unjust enrichment of the beneficiary named in the will
2. Resulting trust: when trust formalities fail in whole or in part, Court will enforce the trust as if the formalities were met (court will also do this if there are leftover funds)
If there is an equitable trust, property will be distributed to
the settlor’s heirs
Penalty clauses in trusts
unenforceable
Trust income paid to beneficiaries
- Rental income on trust property
- Interest on bank accounts
- Cash dividends (NOTE: stock dividends go to principal of the trust, not trust income)
Revocable trusts
Settlor can amend or revoke the trust during their lifetime.
In FL, trusts are revocable unless they expressly say they are irrevocable
truJudicial modification of irrevocable trust
An irrevocable trust may be modified by the court if:
1. the purpose of the trust has been fulfilled, has become illegal, impossible, wasteful, or impracticable
2. unexpected circumstances would defeat or substantially impair the material purpose of the trust
3. the material purpose no longer exists
court can modify an irrevocable trust if it is in the best interests of the beneficiaries
who has standing to seek modification of an irrevocable trust?
trustee or a qualified beneficiary
Nonjudicial modification of irrevocable trust
After the settlor dies, the trustee an beneficiaries can modify if they unanimously agree
Trustee duties
- duty to administer in good faith
- duty of loyalty (no self-dealing)
- duty of impartiality
- duty of prudent administration (conservative investing AND reasonable diversification)
- keep beneficiaries informed of the trust accounting
- duty to deliver trust property how settlor intended
Trustees power to delegate
a trustee can delegate their duties and powers to a prudent trustee of comparable skills
Trustees powers
- to buy, sell, invest, mortgage, or pledge trust property
- to prosecute, defend, or compromise lawsuits
trustee compensation
entitled to reasonable compensation
If a trustee breaches their trust duties, the court may
SOCCERR
1. suspend the trustee
2. order a trustee account
3. compel trustee to redress a breach by paying money/restoring property
4. compel trustee to perform their duties
5. enjoin the trustee
6. reduce or deny compensation
7. remove the trustee
Beneficiary damages for breach of trust
Beneficiary may recover damages for the resulting loss of the trustee’s breach
If trustee commits a breach of trust
it is an automatic wrong and trustee is automatically personally liable
attorneys fees and costs
get paid from the trust
Exculpatory clauses
May relieve a trustee from liability for negligence but CANNOT relieve a trustee from liability for: RIB
1. Reckless indifference to the trust purpose/beneficiaries
2. Intentional misconduct
3. Bad faith
A trustee can be removed if
they breach their duties or the circumstances show the trustee is unfit, or has become incapacitated
If co-trustees cannot reach a unanimous decision
they can act by majority vote
co-trustees must exercise reasonable care to
prevent another from committing a breach of trust and to redress a breach of trust
If a cotrustee dissents to an action, what must they do to not be liable for that action?
must dissent in writing and notify the majority
Spendthrift provisions
lock the $ in the trust by preventing creditors from getting to a beneficiary’s interest (except for alimony, child support, and government creditors)
Rights of creditors after beneficiary’s interest in a spendthrift trust is distributed
creditors can now go after the money
Discretionary trust
trustee has total discretion to distribute the assets as they deem fit
If a discretionary trustee refuses to make payments to a beneficiary
they cannot be forced to make payments to the beneficiary’s creditors
IF there is no spendthrift provision, the court may allow a creditor to reach a beneficiary’s interest in a trust by
attachment of present or future distributions
Creditor claims against settlors
creditors have 2 years to file claims against the settlor after they die–after 2 years expires, creditors lose their right to go after the settlor’s trust
