II. Creation of Trust: Requirements for a Valid Trust Flashcards
Intent to creat a trust with a valid purpose
Settlor must intend to create a trust as compared to creating a gift or a loan of property
- To distinguish, seek to find MANDATORY ENFORCEABLE DUTIES IMPOSED ON A TRUSTEE
- (e.g. to be used for verus with the hope that)
- Use of non-mandatory language does not eliminate trust if other detail lead to conculsion that turst was intended by settlor
- To be valid, Trust requirements CANNOT VIOLATE PUBLIC POLICY
- usually will construe the trust as valid but for the violation if possible
Public Policy Effect on Trusts
- May limit trust inent
- Prohbiits:
- Forefiture provisions
- encouraging divorce
- creating unreasonable demands on a beneficiairy
- promoting or condoning crime
- unreasonable destruction of property
Requirement of Trust Property
- Trust is not established until there is ASCERTAINABLE TRUST PROPERTY (RES).
Ascertainable Trust Property
- is the corpus, the principal, the subject matter
- Must be a SPECIFIC, IDENTIAFABLE, & SEPARABLE property interest to which the trustee’s duties relate
- Need not be tangible but must be a true interest
Holding asset in trust for another person
- If held in trust for the benefit of another person, trust assets are not:
- able to be reached by the beneficiaries creditors
- Trustee must be a PRDUENT INVESTOR
Property Interest in Trust Assets
- It is an EXPECTANCY INTEREST until the trust is actually created
Promise to creat a trust without consideration
Promise to create a trust without consdireation is considered a GRATUITOUS PROMISE
Trust arises when all elements of a valid trust have been made. SEttlor must manifest an intention to THEN CREATE THE TRUST
this can include perofmring duties of the Trustee s
Pour-Over trust
- (e.g. names trustee as benefiicary under life insurance policies while still alive)
- Valid: pour-over from the police is sufficient indenpendt significance to “fund” trust
Fialure to name atrustee
- Fialure to name a trustee does not void the trust. Court may appoint one.
- ONly instance where it might fail is where the settlor demanded that only a pariticular person or entity may serve as trustee and that person is not available upon creation of trust
Doctinre of Merger
Occurs when one person is the sole beneficiary and sole trustee and the sole settlor
Ascertainable Trust Beneficiaries
- Private and honorary trusts must have ascertainable beneficiaries in order to be valid
- Charitable trusts do not shre this requriement
- indefinite nature of beneficiaries contributing to public service is implied by chariable trust
How soon do the trust beneficiaries need to be ascertainable
Must be ascertainable within one year of death (for testamentary)
Is a trustee obligated to serve?
NO–can resign and the court may appoint another unless the trust designates an alternate trustee
Ambiguous statements of beneficiaries
Identifying the beneficiaries ambigiuously (the people I liked best) is usually deemed not ascertainable unless extrinsic evidence or the person being still alive can aid in the process Or if authority has been delegated to the trustee to identify those people
What occurs if the trust is voided for lack of ascertaiable beneficiaries?
A resulting trust occurs, with it resulting back to settlor’s estate and passing according to hte residuary clause or to intestate succession
This also occurs if the ascertainable beneficiaries were at one time ascertainable but no longer are (e.g. TT to chidlren of X. Has no children)
