Introduction

Question 1

Trusts - Basic Concept

Answer 1

• fiduciary relationship in which trustee holds legal title + beneficiary holds equitable title
  -> trustee has a fiduciary duty to manage, invest, safeguard and administer trust assets + income for the benefit of designated beneficiaries

Question 2

Trust - Legal Interest

Answer 2

• held by trustee
• trustee has responsibility of ownership AND receives NO benefit from the legal title (except possibly fee for acting as trustee)

Question 3

Trustee - Basic Role as Fiduciary

Answer 3

• must deal with the property w/ reasonable care
• must maintain utmost degree of loyalty
• is personally responsible if their conduct falls beneath required standards

Question 4

Equitable or Beneficial Interest

Answer 4

• held by beneficiary who receives the benefits of ownership as set forth in the trust

Question 5

Beneficiary - Role in the Trust

Answer 5

• usually has little or no control over the trust or the trust property
• person who enforces the trust and the person the trustee owes duties toward

Question 6

Settlor

Answer 6

• person who causes the trust to come into existence by supplying the initial trust property

Question 7

Trust Property

Answer 7

• REQUIRED
• settlor must supply some kind of property so the trustee has property over which to exercise duties
• aka principal, corpus, trust estate and res

Question 8

Basic Functioning of Trusts

Answer 8

1 - settlor creates trust by transferring legal title to trustee + equitable title to beneficiary
2 - trustee manages + invests the property in accordance w/ legal duties + settlor’s instructions (contained in the trust instrument)
-> trustee also makes payments to or for the benefit of the beneficiary following settlor’s instructions in the trust instrument
3 - when trustee’s duties are completed, trust terminates + trustee distributes any remaining property to remainder beneficiaries

Question 9

Purposes and Uses of Trusts

Answer 9

• providing for + protecting trust beneficiaries
• flexibility of asset distribution
• protection against settlor’s incompetence
• professional management of property
• probate avoidance
• tax benefits

Question 10

Types of Trusts

Answer 10

• express trusts
• resulting trusts
• constructive trusts

Question 11

Express Trusts

Answer 11

• created by the express intention of the settlor

Two categories:
- private -> private beneficiaries (certain ascertainable persons)
- charitable -> charitable beneficiaries (indefinite class of persons or the public in general)

Question 12

Resulting Trusts

Answer 12

• arise from the presumed intention of the owner of the property

Question 13

Constructive Trusts

Answer 13

• equitable remedy used to prevent unjust enrichment