Florida Trusts Flashcards
What is a Trust?
It is a fiduciary relationship in which a trustee holds LEGAL TITLE to specific property under a fiduciary duty to manage, invest, safeguard and administer the trust assets and income for the benefit of designated beneficiaries, who hold EQUITABLE TITLE.
What is legal title?
The actual ownership of the property. Has the duties.
What is equitable title?
A person’s right to obtain ownership of a property or property interest. Gets the benefit.
What is the Florida Trust Code?
The FTC governs express trusts. Common law of trusts and principles of equity supplement the FTC unless modified by the FTC itself or another law of Florida.
Trust?
fiduciary relationship where
a trustee holds a legal title to property
for benefit of trust’s beneficiary (who holds equitable title)
- Creation: (1) someone (grantor/settlor/donor/testator) transfers legal title to property to trustee, who administers trust in accordance w/ settlor’s wishes for benefit of beneficiaries
- Not a bailment [deliver goods to a bailee, w/o transfer of ownership]
Types of Trusts:
Express vs. Implied?
Express trusts: from property owner’s intention; 2 types:
- Private express trusts
- Charitable trust
Implied trusts: created by operation of law (trusts are equitable remedies.); 2 types:
- Resulting trusts: places prop in hands of rightful owner when circumstances require it, even though there has not been any wrongdoing on anyone’s part
- Constructive trusts: deprives wrongdoer from retaining improperly obtained prop. (Result of fraud or unjust enrichment)
Parties to a Trust?
Settlor
Trustee (legal interest in trust property)
Beneficiary (equitable interest in trust property)
Settlor?
creates trust by transferring assets to a trustee AND
manifest intent to create a trust relationship
Self-settled trust?
Person who created the trust, Settlor, is also a beneficiary of the trust; aka “settlor’s ‘declaration of a trust’“
- A spendthrift or discretionary provision will not bar any of the settlor’s creditors; When there’s a self-settled trust, the settlor’s creditors can reach the maximum amount that can be distributed to or for the settlor’s benefit.
- Declaration can be oral, unless trusts assets include real prop [SoF requires writing], but need proof prop being held in capacity as trustee
Trustee?
legal owner of trust property, who holds it for benefit of beneficiaries
- Legal title to, responsibility for, and the management of the trust property resides in the trustee
- Must always be a beneficiary that can enforce the trust against the trustee
- Settlor can be the trustee, if there is a beneficiary in existence who can enforce the trust against the trustee.
- Settlor may also be the beneficiary of the trust.
- However, settlor cannot be the only trustee & beneficiary, because there is no one to enforce the trust against the trustee. [b/c can’t enforce obligation against yourself]
- If a sole trustee is the sole beneficiary, the trust will collapse because the interests will merge.
- Failure to designate a qualified trustee won’t necessarily destroy the trust.
Trustee Duties?
- fiduciary of trust
- must be given some active duties to direct him with respect to trust property in order for trust to be valid; w/o active duties: it is a “passive” or “dry” trust, and title to the trust assets will pass directly to the beneficiaries
- Duties do not have to be spelled out, but need a direction that a court could reasonably interpret his duties
No trustee designated/incompetent/dies: court will generally appoint a trustee …only time courts won’t step in is if settlor stated otherwise …”don’t replace”
Co-Trustees?
2+ persons have been named as trustees,
deemed joint tenant
- will may override this & name a successor trustee
- Co-trustees who are unable to reach a unanimous decision may act by majority decision
- Losing trustee may formally dissent, and avoid liability [filing notice of dissent]
Beneficiary?
the equitable owners of the trust property
General Rights of the Parties in a Trust?
- Rights of Settlor: no longer owns assets; therefore, no rights exist
- Rights of Trustee: adhere to the terms of the trust with respect to the trust assets for the benefit of the beneficiaries; legal title to trust property
- Rights of Beneficiaries: use and enjoyment of the property as distributed; equitable title to trust property
What are the required elements of an Express Trust?
- A settlor with capacity to convey
- same as for a will. need legal capacity. undue influence, fraud, or duress renders the trust void.
- a present intent to create a trust relationship
- a competent trustee with duties
- a definite beneficiary AND
- the same person is not the sole trustee and sole beneficiary.
There also must be a present disposition in trust of specific property then owned by the settlor AND the trust must have a valid trust purpose.
No consideration required.
Precatory Language regarding Trust Creation?
language insufficient to create a trust; precatory is defined as a request and trusts are demands/direction (e.g., these assets are given to Shayla in hopes[I would like] that she distributes them toward Asia’s college education)
- Exception: Even though the language is precatory, there is so much specificity, the courts will interpret it as mandatory. (Ex: $5000 to Asia. Joe would like Shayla to invest the money in an annuity that will pay $200/month to Asia.)
To create a trust, a settlor must have _________ intent.
present intent
- Ex: “I will put $5000 in trust for Terry next week” does not create a trust. [It is a mere promise not supported by consideration.]?
If a trust states that it will name
the beneficiaries later, it is a _________.
resulting trust
- Resulting trusts: places prop in hands of rightful owner when circumstances require it, even though there has not been any wrongdoing on anyone’s part
- In Florida, if a trust fails for a lack of a beneficiary, then a resulting trust will be presumed in favor of the settlor or her successors.
If the settlor does not own the trust property and then subsequently buys the property, is a trust created?
No
cannot have a present intent for unknown property
What cannot be trust property?
- mere expectations
- unearned profits
- debt owed by the trustee [can’t sue yourself]
There must be some certainty over what is the trust property.
Must a trust must have ascertainable beneficiaries?
YES
- “To my friends” is too vague.
- “To my family” is also vague, but the courts will interpret it to mean heirs.
- If Settlor provides objective standard by which to identify beneficiaries, then those beneficiaries are ascertainable.
- a) Must provide a reasonable basis [Ex: Hold property in trust for “person who provided best health care for me before my death.”]
- b) Court will defer to trustee’s discretion unless: its arbitrary, capricious or acted in bad faith
- Trust may give trustee right to invade trust corpus for benefit of beneficiary subject to his discretion.
- Trust may give partial or total discretion.
Discuss Active Duties with respect to a trust?
- Must have active duties, if not it becomes “passive” or “dry” and that person must transfer legal title to beneficiary and end trust
- Duties do not have to be spelled out, but need a direction that a court could reasonably interpret his duties